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The following financial information relates to XYZ Company: Inventory turnover: 5 times Accounts receivable turnover = 6 times Accounts payable turnover = 4 times XYZ gives its customers a credit period of 60 days. XYZ’s suppliers offer a credit period of 90 days. For simplicity, we assume that the year consists of 360 days. a) Calculate the operating and cash cycle for XYZ Company b) Evaluate the implications of the cash cycle for XYZ’s working capital management

The following financial information relates to XYZ Company: Inventory turnover: 5 times Accounts receivable turnover = 6 times Accounts payable turnover = 4 times XYZ gives its customers a credit period of 60 days. XYZ’s suppliers offer a credit period of 90 days. For simplicity, we assume that the year consists of 360 days. a) Calculate the operating and cash cycle for XYZ Company b) Evaluate the implications of the cash cycle for XYZ’s working capital management

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter12: Fainancial Statement Analysis
Section: Chapter Questions
Problem 30MCQ
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The following financial information relates to XYZ Company:

Inventory turnover: 5 times

Accounts receivable turnover = 6 times

Accounts payable turnover = 4 times

XYZ gives its customers a credit period of 60 days.

XYZ’s suppliers offer a credit period of 90 days.

For simplicity, we assume that the year consists of 360 days.

a) Calculate the operating and cash cycle for XYZ Company

b) Evaluate the implications of the cash cycle for XYZ’s working capital management

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