Dandee-Lion's Tack Coral has annual sales of $900,000; cost of goods sold of $450,000; average inventory of $5,000; average accounts receivable of $40,000; and an average accounts payable balance of $20,000. Assuming that all of Dandee-Lion's sales are on credit, what is the length of the company's cash cycle?
Show your work processes.
Refer to these:
Cash cycle = Inventory conversion period + Receivables conversion period – Payables conversion period.
Inventory conversion period = Avg. Inventory / (COGS / 365)
Receivables conversion period = Avg. Accounts Receivable / (Credit Sales / 365)
Payables conversion period = Avg. Accounts Payable / (Purchases / 365).