Clay’s forging at canal fulton wants to determine its inventory management performance during its past year of operations. refer to the following information provided by the company: inventory on hand at beginning of the year = $273,000 inventory on hand at end of the year = $290,000 annual cost of goods sold = $1,790,000 average annual accounts receivable = $45,500 annual credit sales = $102,000 beginning-of-year accounts payable = $227,500 end-of-year accounts payable = $316,200 total annual purchases = $1,575,000 based on the above information, calculate the cash-to-cash cycle time (ccct).

days on inventory 57 + collection cycle 163- payment cycle 63

CCCT = 157 days

Explanation:

The cash-to-cash measures the times from the company paid his good from the time it collect from the customer:

days inventory outstanding + collection cycle - payment cycle

days inventory outstanding:

Where:

where:

COGS                         $ 1,790,000

Beginning Inventory: $    273,000

Ending Inventory:      $   290,000

Average Inventory:   $     281,500

Inventory TO6.358792185

Days on Inventory57

Collection cycle:

where:

Purchases:      1,575,000

Beginning AP:   227,500

Ending AP:         316,200

Average AP:      271,850

AP TO5.793636196

payment cycle63

Collection cycle

Sales102,000

Average AR45,500

AR TO2.241758242

collection cycle163

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