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DX had the following balances in its trial balance at 30 September 2006:
Trial balance extract at 30 September 2006
$000 $000
Revenue 2,400
Cost of sales 1,400
Inventories 360
Trade receivables 290
Trade payables 190
Cash and cash equivalents 95
Calculate the length of DX's working capital cycle at 30 September 2006.
Solution:
Inventories days
(Inventories / cost of sales) x 365 days
(360 / 1,400) x 365 days
93.9 days
Trade receivable days
(Trade receivables / credit sales) x 365 days
(290 / 2,400) x 365 days
44.1 days
Trade payable days
(Trade payables / cost of sales) x 365 days
(190 / 1,400) x 365 days
49.5 days
Working capital cycle
93.9 + 44.1 -49.5
88.5 days
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