1 Pretty Lady Cosmetic Products has an average production process time of 40 days. Finished goods...

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1 Pretty Lady Cosmetic Products has an average productionprocess time of 40 days. Finished goods are kept on hand for anaverage of 15 days before they are sold. Accounts receivable areoutstanding an average of 35 days, and the firm receives 40 days ofcredit on its purchases from suppliers.a.Estimate the averagelength of the firm's short-term operating cycle. How often wouldthe cycle turn over in a year?b.Assume net sales of $1,200,000 andcost of goods sold of $900,000. Determine the average investment inaccounts receivable, inventories, and accounts payable. What wouldbe the net financing need considering only these threeaccounts?

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3.9 Ratings (798 Votes)

Sales	1,200,000
Cost of goods sold	900,000
Days for inventory conversion	15
Inventory turnover ratio	24.33	[365/ days for inventory]
Investment in inventory	36986.30137	[COGS/ Inventory turnover ratio]

Sales	1,200,000
Days for accounts receivable	35
Accounts receivable turnover ratio	10.43	[365/ Days for accounts receivable]
Investment in accounts receivable	115068.4932	[Sales/ Accounts receivable turnover ratio]

Cost of goods sold	900,000
Days for accounts payable	40
Accounts Payable turnover ratio	9.13	[365/ days for accounts paybale]
Investment in accounts payable	98630.13699	[COGS/ Accounts payable turnover ratio]

Investment in inventory	36986.30137
Investment in accounts receivable	115068.4932
Investment in accounts payable	-98630.13699
Net financing needed	53424.65753

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1 Pretty Lady Cosmetic Products has an average productionprocess time of 40 days. Finished goods are kept on hand for anaverage of 15 days before they are sold. Accounts receivable areoutstanding an average of 35 days, and the firm receives 40 days ofcredit on its purchases from suppliers.a.Estimate the averagelength of the firm's short-term operating cycle. How often wouldthe cycle turn over in a year?b.Assume net sales of $1,200,000 andcost of goods sold of $900,000. Determine the average investment inaccounts receivable, inventories, and accounts payable. What wouldbe the net financing need considering only these threeaccounts?