Answer:
days on inventory 57 + collection cycle 163- payment cycle 63
CCCT = 157 days
Explanation:
The cash-to-cash measures the times from the company paid his good from the time it collect from the customer:
days inventory outstanding + collection cycle - payment cycle
days inventory outstanding:
[tex]\frac{365}{Inventory TO} = $Days on Inventory[/tex]
Where:
[tex]\frac{COGS}{Average Inventory} = $Inventory Turnover[/tex]
where:
[tex]$Average Inventory=(Beginning Inventory + Ending Inventory)/2[/tex]
COGS $ 1,790,000
Beginning Inventory: $ 273,000
Ending Inventory: $ 290,000
Average Inventory: $ 281,500
[tex]\frac{1790000}{281500} = $Inventory Turnover[/tex]
Inventory TO 6.358792185
[tex]\frac{365}{6.35879218472469} = $Days on Inventory[/tex]
Days on Inventory 57
Collection cycle:
[tex]\frac{Sales}{Average AP} = $AP Turnover[/tex]
where:
[tex]$Average AP=(Beginning AP+ Ending AP)/2[/tex]
Purchases: 1,575,000
Beginning AP: 227,500
Ending AP: 316,200
Average AP: 271,850
[tex]\frac{1575000}{271850} = $AP Turnover[/tex]
[tex]\frac{365}{AP TO} = $payment cycle [/tex]
AP TO 5.793636196
payment cycle 63
Collection cycle
[tex]\frac{Sales}{Average AR} = $AR Turnover[/tex]
Sales 102,000
Average AR 45,500
[tex]\frac{102000}{45500} = $AR Turnover[/tex]
[tex]\frac{365}{AR TO} = $collection cycle[/tex]
AR TO 2.241758242
[tex]\frac{365}{2.24175824175824} = $collection cycle[/tex]
collection cycle 163
