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# Calculating net operating cycle

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Question:
Below are part of the financial statements ABC Corp. provided, presented in millions of US dollars.
please calculate the net operating cycle based on the information provided.

Sales 400,000
Cost of Goods Sold 350,000
Inventories as of 12/31/12 40,000
Inventories as of 12/31/13 43,400
Receivable as of 12/31/12 6,000
Receivable as of 12/31/13 7,000

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## SOLUTION This solution is FREE courtesy of BrainMass!

Net Operating Cycle = #Days of Sales of Inventory + #Days of Sales Outstanding

#Days of Sales of Inventory = 365 * Average Inventories/Purchases

#Days of Sales Outstanding = 365 * Average Receivable/Credit Sales

Average Inventories = (43,400 + 40,000)/2
= 41,700

#Days of Sales of Inventory = 365 * 41,700/350,000
= 43.49

Average Receivable = (6,000 + 7,000)/2
= 6,500

#Days of Sales Outstanding = 365 * 6,500/400,000
= 5.93

Net Operating Cycle = 43.49 + 5.93
= 49.42 days

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Â© BrainMass Inc. brainmass.com December 24, 2021, 11:40 pm ad1c9bdddf>