Question
Ives Corporation has an inventory period of 22.3 days, an accounts payable period of 35.9 days, and an accounts receivable period of 31.1 days. What is the company's cash cycle?
Multiple Choice
27.1 days
89.3 days
44.7 days
17.5 days
53.4 days
Multiple Choice
27.1 days
89.3 days
44.7 days
17.5 days
53.4 days
Answers
GPT-4o mini
The cash conversion cycle (or cash cycle) can be calculated using the formula:
\[
\text{Cash Cycle} = \text{Inventory Period} + \text{Accounts Receivable Period} - \text{Accounts Payable Period}
\]
Given:
- Inventory Period = 22.3 days
- Accounts Receivable Period = 31.1 days
- Accounts Payable Period = 35.9 days
Now, substituting the values into the formula:
\[
\text{Cash Cycle} = 22.3 + 31.1 - 35.9
\]
Calculating:
\[
\text{Cash Cycle} = 53.4 - 35.9 = 17.5 \text{ days}
\]
Therefore, the company's cash cycle is **17.5 days**.
The correct choice is:
**17.5 days**.
\[
\text{Cash Cycle} = \text{Inventory Period} + \text{Accounts Receivable Period} - \text{Accounts Payable Period}
\]
Given:
- Inventory Period = 22.3 days
- Accounts Receivable Period = 31.1 days
- Accounts Payable Period = 35.9 days
Now, substituting the values into the formula:
\[
\text{Cash Cycle} = 22.3 + 31.1 - 35.9
\]
Calculating:
\[
\text{Cash Cycle} = 53.4 - 35.9 = 17.5 \text{ days}
\]
Therefore, the company's cash cycle is **17.5 days**.
The correct choice is:
**17.5 days**.