Genovese Fine Foods, a manufacturer of foodstuffs, buys durham wheat flour on credit on June 1. It processes this flour to make pasta on June 6 and pays cash for the flour on June 15. On June 22 it sells the pasta to a chain of supermarkets, and on July 3 receives cash payment for this sale. What is the length of the cash cycle in this case? A. 28 days B. 18 days C. 8 days D. 12 days

Question

Valentin Foster

Business

28 May, 13:57

Genovese Fine Foods, a manufacturer of foodstuffs, buys durham wheat flour on credit on June 1. It processes this flour to make pasta on June 6 and pays cash for the flour on June 15. On June 22 it sells the pasta to a chain of supermarkets, and on July 3 receives cash payment for this sale. What is the length of the cash cycle in this case? A. 28 days B. 18 days C. 8 days D. 12 days

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Fuller · Answer 1

B. 18 days

Explanation:

The computation of the cash cycle is shown below:

The cash cycle = Days inventory outstanding + days sale outstanding - days payable outstanding

The cash payment was made on June 15

And, the cash received on July 3

The days in between are 15 days in June month and 3 days in July month. So, total days would be

= 15 days + 3 days

= 18 days