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A firm has an inventory period of 59.6 days, an accounts receivable period of 42.3 days, and an accounts payable period of 39.1 days. What is the firm's cash cycle?

a) 62.8 days
b) 62.8 days
c) 62.8 days
d) 62.8 days

Answer :

The firm's cash cycle can be calculated by adding the inventory and accounts receivable periods and subtracting the accounts payable period. The firm's cash cycle is 63.8 days.

Calculating the Cash Cycle

The cash cycle, also known as the cash conversion cycle, is a metric that shows how long a firm takes to convert its investments in inventory and other resources into cash flows from sales. You can calculate it using the following formula:

Cash Cycle = Inventory Period + Accounts Receivable Period - Accounts Payable Period

Using the data provided:

  1. Inventory Period: 59.6 days
  2. Accounts Receivable Period: 42.3 days
  3. Accounts Payable Period: 39.1 days

So, we calculate the cash cycle as follows:

  1. 59.6 days + 42.3 days - 39.1 days
  2. = 102.9 days - 39.1 days
  3. = 63.8 days

Thus, the firm's cash cycle is 63.8 days.

The complete question is- A firm has an inventory period of 59.6 days, an accounts receivable period of 42.3 days, and an accounts payable period of 39.1 days. What is the firm's cash cycle?

Thank you for reading the article A firm has an inventory period of 59 6 days an accounts receivable period of 42 3 days and an accounts payable period of 39. We hope the information provided is useful and helps you understand this topic better. Feel free to explore more helpful content on our website!

Rewritten by : Jeany

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