A company's cash-to-cash cycle time is 36 days. How many weeks of inventory are on hand if the average collection time from customers is 60 days, and the company pays its vendors in 45 days?
A company's cash-to-cash cycle time is 36 days. How many weeks of inventory are on hand if the average collection time from customers is 60 days, and the company pays its vendors in 45 days?
To find the number of weeks of inventory on hand, we first need to calculate the inventory days. The cash-to-cash cycle time is the total time it takes from outlaying cash for raw material to receiving cash from product sales. This is calculated as Inventory Days + Days Sales Outstanding (DSO) - Days Payable Outstanding (DPO). Given that the cash-to-cash cycle time is 36 days, the average collection time (DSO) is 60 days, and the company pays its vendors (DPO) in 45 days, we can set up the equation: 36 = Inventory Days + 60 - 45. Simplifying this, we get Inventory Days = 36 - 15, which results in Inventory Days = 21. To convert days to weeks, we divide by 7, giving us 21 / 7 = 3 weeks.
21 days should be B
36= 60 - 45 +x; x= 21; the question is if we are measuring in 7 days per week or 5 days per working week...
The answer should be 21 days=3 weeks
can someone provide a clear step of calculation ?
answer is B 3 weeks...21 days ( hope it will take week as 7 days when calculating inventory) 36=60-45+X X=21