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Estimate the average length of the firms short -term

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Pretty LADY cosmetics products has an average production process time of 40 days. Finished goods are kept on hand for an average of 15 days before they are sold. Accounts receivable are outstanding an average of 35 days, and the firm receives 40 days of credit on its purchases from suppliers.

a) Estimate the average length of the firms short -term operating cycle. How often would the cycle turn over in a year?

b.) Assume net sales of $1,200,000 cost of goods sold of $900,000. Determine the average investment in accounts receivable, inventories and accounts payable. What would be the net financing need considering only these accounts.

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The given assignment relates to Pretty Lady Cosmetics. The assignment involves calculation of length of operating cycle and total financing needs. The operating cycle is calculated using the formula (Average Production Period Average Finished Goods Period Average Accounts Receivable Period) - (Average Credit Period). And the Financing needs are calculated using the Average Receivables, Inventory and Creditors.

Reference no: EM131749091

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