AR company has the following financial statement information: Item Beginning($) Ending($) Inventory 7800.00 10200.00 Accounts receivable 3500.00 4500.00 Accounts payable 7500.00 7900.00 Credit sales 90000.00 Cost of goods sold 56000.00 Assume that there are 365 days yearly, answer the following questions. (a) Calculate the operating cycle. (b) Calculate the cash cycle. (c) Judge whether the following statement is true and explain your answer: “It is possible to have a negative cash cycle”.
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
AR company has the following financial statement information:
| Item | Beginning($) | Ending($) | |
| Inventory | 7800.00 | 10200.00 | |
| Accounts receivable | 3500.00 | 4500.00 | |
| Accounts payable | 7500.00 | 7900.00 | |
| Credit sales | 90000.00 | ||
| Cost of goods sold | 56000.00 |
Assume that there are 365 days yearly, answer the following questions.
(a) Calculate the operating cycle.
(b) Calculate the cash cycle.
(c) Judge whether the following statement is true and explain your answer:
“It is possible to have a negative cash cycle”.
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