To calculate the accounts receivable period, accounts payable period, inventory period, and cash conversion cycle, we need to use the following formulas:
1. Accounts Receivable Period = (Average Accounts Receivable / Sales) * 365
2. Accounts Payable Period = (Average Accounts Payable / Cost of Goods Sold) * 365
3. Inventory Period = (Average Inventory / Cost of Goods Sold) * 365
4. Cash Conversion Cycle = Inventory Period + Accounts Receivable Period - Accounts Payable Period
First, let's calculate the average values for accounts receivable, accounts payable, and inventory:
Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
= (100 + 120) / 2
= 110
Average Accounts Payable = (Beginning Accounts Payable + Ending Accounts Payable) / 2
= (250 + 290) / 2
= 270
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
= (500 + 600) / 2
= 550
Now, we can calculate the individual periods:
1. Accounts Receivable Period = (Average Accounts Receivable / Sales) * 365
= (110 / 5000) * 365
= 8.03 days
2. Accounts Payable Period = (Average Accounts Payable / Cost of Goods Sold) * 365
= (270 / 4200) * 365
= 23.47 days
3. Inventory Period = (Average Inventory / Cost of Goods Sold) * 365
= (550 / 4200) * 365
= 47.98 days
Finally, we can calculate the cash conversion cycle:
Cash Conversion Cycle = Inventory Period + Accounts Receivable Period - Accounts Payable Period
= 47.98 + 8.03 - 23.47
= 32.54 days
Therefore, the accounts receivable period is 8.03 days, the accounts payable period is 23.47 days, the inventory period is 47.98 days, and the cash conversion cycle is 32.54 days.