Consider the following financial statement information for the Amaryliss Corporation: Item Beginning Ending Inventory $10,382 $11,180 Accounts receivable 5,651 6,181 Accounts payable 5,952 6,293 Net sales $139,303 Cost of goods sold 87,113 Assume all sales are on credit. Calculate the operating and cash cycles

60.67 days and 35.02 days

Explanation:

The computation of the operating and cash cycles is shown below:

The operating cycle = Days inventory outstanding + days sale outstanding

where,

Day inventory outstanding = (Beginning inventory + ending inventory) : 2 : cost of goods sold * number of days in a year

= ($10,382 + $11,180) : $87,113 * 365 days

= ($10,782 : $87,113) * 365 days

= 45.17 days

Day sale outstanding = (Beginning Accounts receivable + ending Accounts receivable) : 2 : Net sales * number of days in a year

= ($5,651 + $6,181) : 2 : $139,303 * 365 days

= ($5,916 : $139,303) * 365 days

= 15.50 days

Now put these days to the above formula

So, the days would equal to

= 45.17 days + 15.50 days

= 60.67 days

Now The cash cycle = Days inventory outstanding + days sale outstanding - days payable outstanding

where,

Day payable outstanding = (Beginning Accounts payable + ending Accounts payable) : 2 : cost of goods sold * number of days in a year

= ($5,952 + $6,293) : $87,113 * 365 days

= ($6122.50 : $87,113) * 365 days

= 25.65 days

Now put these days to the above formula

So, the days would equal to

= 45.17 days + 15.50 days - 25.65 days

= 35.02 days