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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

    © BrainMass Inc. brainmass.com December 24, 2021, 11:40 pm ad1c9bdddf
    https://brainmass.com/business/the-accounting-cycle/calculating-net-operating-cycle-591571

    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!

    © BrainMass Inc. brainmass.com December 24, 2021, 11:40 pm ad1c9bdddf>
    https://brainmass.com/business/the-accounting-cycle/calculating-net-operating-cycle-591571

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