From the course: Managerial Finance Foundations
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Managing receivables and inventory
From the course: Managerial Finance Foundations
Managing receivables and inventory
- A companies operating cycle is the length of time from when the company buys its inventory until when the company collects the cash associated with selling that inventory. The total length of the operating cycle is the sum of two time periods. The number of days that elapsed from the purchase of the inventory to when it's sold, plus the number of days from the sale of the inventory until when the customer pays in cash. Walmart for example, sells the inventory that it purchases from Toro, Procter and Gamble and its other suppliers in an average of 39 days. This number is called the number of day sales and inventory and is computed as follows. Average daily cost of sales is just the annual cost of sales divided by 365 days. Using the numbers for Walmart for the year ended January 31st, 2021. The number of days sales and inventory is computed as follows. That's an average across all Walmart product lines. Some items…
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