Operating Cycle Flashcards
1
Q
Operating Cycle
A
Determined the time it takes cash investment to flow from cash through inventory, sales, receivables and back to cash
2
Q
Days payable is defined as
A
Average number of days it took the company to pay its trade suppliers
3
Q
Days payable is calculated as:
A
Accounts Payable
———————— x days (use 360)
Cost of goods sold
4
Q
Formula for operating cycle:
A
Days Receivable \+ Days Inventory - Days Payable - Days Accrual
5
Q
Inventory includes:
A
Inputs of production
+ finished goods
—————————
= inventory
6
Q
Days Accrual is defined as:
A
The average number of days it took the company to pay its accrued expenses (officer salary, wages and etc)
