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What is the company's cash cycle if Ives Corp. has:

- An inventory period of 22.5 days,
- An accounts payable period of 37.1 days,
- An accounts receivable period of 31.7 days?

Answer :

The cash cycle is a measure of the time it takes for a company to convert its investment in inventory into cash. It is calculated by adding the inventory period to the accounts receivable period and subtracting the accounts payable period.

It can be calculated using the formula: Cash Cycle = Inventory Period + Accounts Receivable Period - Accounts Payable Period.

In the given scenario:

Inventory Period = 22.5 days

Accounts Payable Period = 37.1 days

Accounts Receivable Period = 31.7 days

Plugging in these values into the formula, we get:

Cash Cycle = 22.5 days + 31.7 days - 37.1 days

Simplifying the equation, we have:

Cash Cycle = 17.1 days

Therefore, Ives Corp.'s cash cycle is 17.1 days. This means that, on average, it takes the company 17.1 days to convert its cash into inventory, sell the inventory on credit, and collect the payment from customers. The cash cycle provides insight into the company's working capital management and liquidity, indicating how efficiently the company manages its cash conversion cycle.

To know more about cash cycle click this link -

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