
Essentials Of Investments
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Calculating Cycles
Consider the following financial statement information for the Hop Corporation:
Item | Beginning | Ending | |
Inventory | $16,284 | $19,108 | |
Accounts Receivable | 11,219 | 13,973 | |
Accounts Payable | 13,960 | 16,676 | |
Net Sales | $219,320 | ||
Cost of Goods Sold | 168,420 |
Calculate the operating and cash cycles. How do you interpret your answer?
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Step 1: Operating Cycle = Inventory Period + Accounts Receivable Period
VIEW Step 2: Calculation of Inventory Period
VIEW Step 3: Calculation of Accounts Receivable Period
VIEW Step 4:Operating Cycle = Adding the values calculated in STEP 2 and STEP 3
VIEW Step 5: Calculation of Cash cycle or Net Operating Cycle
VIEW Step 6: Accounts Payable Period calculation
VIEW Step 7: Cash cycle = Inventory Period + Accounts Receivable Period - Accounts Payable Period
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