2. Operating Cycle. Selected information for 2017 for the Premium Company is as

Question

2. Operating Cycle. Selected information for 2017 for the Premium Company is as follows: Cost of Good Sold Average Inventory Net Sales Average Receivables Net Income P S,400,000 1,800,000 7,200,000 960,000 720,000 a. What is the Accounts Receivable Turnover? b. Assuming a Business year consiting of 360 da c. What is the Inventory Turnover? d. Assuming a Business year consiting of 360 days, what is the average number of days of inventory? e. Assuming a Business year consiting of 360 days, how many days is the operating cycle? ys, what is the average collection period?

Explanation / Answer

accounts receivable turnover

=7200000/960000

=7.50

average collection period

=360/7.50

=48 days

inventory turnover

=5400000/1800000

=3.0

average number of days of inventory=360/3

=120 days

operating cycle=48+120

=168 days

the above are answers

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