Using the table below, calculate the length of the working capital cycle (operating cycle).
Inventories: raw materials
$250,000
Work in progress
$115,000
Finished goods
$186,000
Purchases
$1,070,000
Cost of goods sold
$1,458,000
Revenue
$1,636,000
Receivables
$345,000
Trade Payables
$162,000
The correct answer is: 182 days.
Raw material inventory turnover (250/1070 x 365 days)
85.3 days
Less payables: average payment period (162/1070 x 365)
(55.3) days
30 days
Production cycle (WIP revenue) (115/1458 x 365)
28.8 days
Finished goods inventory turnover (186/1,458 x 365)
46.6 days
Debt collection period (345/1,636 x 365)
77.0 days
Full operating cycle
182.4 days
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