Suppose that LilyMac Photography has annual sales of $240,000, cost of goods sol
ID: 2825876 • Letter: S
Question
Suppose that LilyMac Photography has annual sales of $240,000, cost of goods sold of $175,000, average inventories of $5,500, and average accounts receivable of $26,000. Assume that all of LilyMac’s sales are on credit.
What will be the firm’s operating cycle? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places.)
Suppose that LilyMac Photography has annual sales of $240,000, cost of goods sold of $175,000, average inventories of $5,500, and average accounts receivable of $26,000. Assume that all of LilyMac’s sales are on credit.
Explanation / Answer
Days Accounts receivables = Average Accounts receivables / Annual sales * 365 days
= 26000 / 240000 * 365 = 39.54
Days for Inventory holding = Average Inventories / Cost of goods sold * 365
= 5500 / 175000 * 365 = 11.47
Firms operating cycle = 39.54 + 11.47 = 51.01 days