Question

Calculate the operating cycle based on the following information:

Sales = $94,766
COGS = $34,817
Inventory = $12,905
Accounts Receivable = $15,405

Enter your answer rounded off to two decimal points.

Answer 1

Operating cycle is 194.62 days

Step-1:Calculation of days inventory outstanding
Days inventory outstanding	=	Days in a year	/	Inventory turnover
	=	365	/	2.70
	=	135.29 days
Working:
Inventory turnover	=	Cost of goods sold	/	Inventory
	=	$       34,817	/	$       12,905
	=	2.70
Step-2:Calculation of days sales outstanding
Days sales outstanding	=	Days in a year	/	Accounts receivable turnover
	=	365	/	6.15
	=	59.33 days
Working:
Accounts receivable turnover	=	Sales	/	Accounts receivable
	=	$       94,766	/	$       15,405
	=	6.15
Step-3:Calculation of operating cycle
Operating cycle	=	Days inventory outstanding	+	Days sales outstanding
	=	135.29	+	59.33
	=	194.62 days