Given the following financial statement data, calculate the operating cycle for this company. How long is the net operating cycle (=cash conversion cycle) for this company.

Credit sales = $25,000 mil

COGS=420,000 mil

Accounts receivable = $2,500 mil

Inventory - Beginning balance = $2,000 mil

Inventory - Ending balance = $2,300 mil

Accounts payable=$1,700 mil

The computation of the operating and the cash cycle is shown below:

The operating cycle = Days inventory outstanding + days sale outstanding

where,

Day inventory outstanding = (Beginning inventory + ending inventory) : cost of goods sold * number of days in a year

= ($2,000 + $2,300) : $420,000 * 365 days

= ($4,300 : $420,000) * 365 days

= 3.73 days

Day sale outstanding = (Beginning Accounts receivable + ending Accounts receivable) : Net sales * number of days in a year

= ($2,500 + $0) : $25,000 * 365 days

= ($4,200 : $25,000) * 365 days

= 36.5 days

Now put these days to the above formula

So, the days would equal to

= 3.73 days + 36.5 days

= 40.23 days

Now The cash cycle = Days inventory outstanding + days sale outstanding - days payable outstanding

where,

Day payable outstanding = (Beginning Accounts payable + ending Accounts payable) : cost of goods sold * number of days in a year

= ($0 + $1,700) : $420,000 * 365 days

= ($1,700 : $420,000) * 365 days

= 1.47 days

Now put these days to the above formula

So, the days would equal to

= 3.73 days + 36.5 days - 1.47 days

= 38.76 days