Perfect Purchase Electronics Selected Income Statement Items, 2009 Cash Sales: 2

ID: 2708555 • Letter: P

Question

Perfect Purchase Electronics

Selected Income Statement Items, 2009

Cash Sales: 2,100,000 Total Sales: 7,500,000 Credit Sales: 5,400,000 CGS: 5,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts

Accounts Receivable: 12/31/09: 280,000 12/31/08: 270,000 Change: 10,000

Inventory: 12/31/09: 115,000 12/31/08: 120,000 Change: 5,000

Accounts Payable: 12/31/09: 100,000 12/31/08: 110,000 Change: 10,000

A) What is the inventory turnover?

B) What is the inventory cycle?

C) What is the accounts receivable turnover?

D) What is the accounts receivable cycle?

E) What is the accounts payable turnover?

F) What is the accounts payable cycle?

G) What is the operating cycle?

H) What is the cash conversion cycle?

Thank you

inventory turnover=CGS/AVG INVENTORY

5,000,000/(115,000+120,000)/2=42.53

INVENTORY CYCLE= 365/INVENTORY TURNOVER

365/42.53= 8.57

aCCOUNTS RECIEVABLE = CREDIT SALES/ AVG DEBTORS

5400000/(280000+270000)/2=19.63

ACC REIVABLE CYCLE= 365/19.63 =18.58

ACC PAYABLE TURNOVER = PURCHASES/AVG CREDITORS

COGS= OPENING STOCK + PRUCHASES- CLOSING STOCK

5000000=115000+P-120000

P=5005000

ACC TURNOVER=5005000/(100000+110000)/2

=47.67

ACC PAYABLE CYCLE= 365/ 47.67=7.65

OPERATING CYCLE= DAYS OF RAW MATERIAL+ DAYS OF DEBTORS

=8.57+19.63

=28.2

CASH CYCLE=DAYS OF RAW MATERIAL+ DAYS OF DEBTORS- DAYS OF PAYABLE

=20.55

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