Ferry's Furniture Outlet has an accounts receivable period of 51.06 days and an accounts payable period...

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Finance

Ferry's Furniture Outlet has an accounts receivable period of51.06 days and an accounts payable period of 43.07 days. Thecompany turns over its inventory 5.69 times per year. What is thelength of the company's operating cycle? Assume 365 days peryear.
94.13 days
72.14 days
21.08 days
115.21 days
107.22 days

Answer & Explanation Solved by verified expert

4.1 Ratings (702 Votes)

The formula for computing the operating cycle is:

Operating cycle= Inventory period+ Receivables collection period

The receivables collection period is already given. So, the question is solved by first calculating the inventory period. Inventory period is calculated using the below formula:

Days of inventory = 365/ Inventory turnover

= 365/ 5.69

= 64.15 days

Operating cycle= 64.15 days + 51.06 days

= 115.2076 days

Therefore, the operating cycle is 115.21 days.

Hence, the answer is option d.

In case of any query, kindly comment on the solution.

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Transcribed Image Text

Ferry's Furniture Outlet has an accounts receivable period of51.06 days and an accounts payable period of 43.07 days. Thecompany turns over its inventory 5.69 times per year. What is thelength of the company's operating cycle? Assume 365 days peryear.94.13 days72.14 days21.08 days115.21 days107.22 days