Ribaudo Corporation has provided the following financial data from its balance s

Question

Ribaudo Corporation has provided the following financial data from its balance sheet and income statement:

The company's operating cycle for Year 2 is closest to:

95.9 days

75.3 days

162.0 days

9.2 days

Year 2 Year 1 Cash $74,000 $130,000 Accounts receivable $255,000 $240,000 Inventory $173,000 $180,000 Total current assets $564,000 $610,000 Total assets $1,350,000 $1,330,000 Accounts payable $170,000 $160,000 Total liabilities $633,000 $620,000 Total stockholders' equity $717,000 $710,000 Sales (all on account) $1,290,000 Cost of goods sold $700,000

Explanation / Answer

Operating Cycle = Days Inventory Outstanding-+ Days Sales Outstanding-Days Payables Outstanding Average Inventory/ COGS)*365+ Accounts Receivale/ Sales*365+Average Payble/ Purchases*365 DIO = 173000+180000/700000*2 92.03 DSO = 255000+240000/1290000*2 70.02 Operating Cycle = 92+70 162 The correct answer is C. 162 days Purchases are not given so DPO is assumed to be 0

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