Dover Wholesalers sells products exclusively to Benn Retailer. Benn Retailer buys exclusively from Dover Wholesalers. Dover Wholesalers has a receivables period of 44 days, an inventory period of 8 days, and a payables period of 63 days. Benn Retailer has an inventory period of 15 days, a receivables period of 22 days, and a payables period of 44 days. Which statement is correct given this information? A) Benn Retailer has an operating cycle of 81 days. B) Dover Wholesalers is financing 100 percent of Benn Retailer's operating cycle. C) It takes Benn Retailer less time to collect payment on a sale than it does for the firm to sell its inventory. D) Dover Wholesalers has a cash cycle of 11 days. E) Dover Wholesalers has a shorter operating cycle than does Benn Retailer.

Question

Bonilla

Business

29 October, 04:32

Dover Wholesalers sells products exclusively to Benn Retailer. Benn Retailer buys exclusively from Dover Wholesalers. Dover Wholesalers has a receivables period of 44 days, an inventory period of 8 days, and a payables period of 63 days. Benn Retailer has an inventory period of 15 days, a receivables period of 22 days, and a payables period of 44 days. Which statement is correct given this information? A) Benn Retailer has an operating cycle of 81 days. B) Dover Wholesalers is financing 100 percent of Benn Retailer's operating cycle. C) It takes Benn Retailer less time to collect payment on a sale than it does for the firm to sell its inventory. D) Dover Wholesalers has a cash cycle of 11 days. E) Dover Wholesalers has a shorter operating cycle than does Benn Retailer.

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Answers (1)

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Bennett Parrish · Answer 1

Answer: B) Dover Wholesalers is financing 100 percent of Benn Retailer's operating cycle.

Explanation: The operating cycle is the account receivable period added to the inventory period,

Operating cycle:

Benn retailers = 22+15 = 37 days

Dover Wholesalers = 44 + 8 = 52 days

Cash cycle = account receivable - account payable + inventory period

Benn retailers = 22 - 44 + 15 = - 7

Dover Wholesalers = 44 - 63 + 8 = - 11

Therefore what is correct according to the statement above is that Dover wholesalers is financing 100% of Benn Retailer's operating cycle as Benn retailers purchase exclusively, that all it's goods or products from Dovers which could probably mean that Dovers is using Benn to retail its product to consumers.