Cash Management - Cash Cycle

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Tjcgti
Tjcgti Registered Posts: 40 Epic contributor 🐘
in AAT Level 3 (Level 6 in Scotland)
Hi,
Is there anything wrong with the following?
I have copied it out of the answer page of my revision book. I'm just confused as to me it looks like the 'Cash Cycle' should be 3 months? Is this a typo or am I missing something as with only just starting this book its all new to me.


Raw material turnover period = 4.0 months

Less: Credit taken from suppliers = (3.0) months

Finished goods inventory (stock) turnover period = 1.0 months

Receivables' (debtors') payment method = 2.0 months

Cash Cycle = 4.0 months

Thanks

Comments

  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034 mod
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    you are right
    Sandy
    sandy@sandyhood.com
    www.sandyhood.com
  • *Gems*
    *Gems* Registered Posts: 15 New contributor 🐸
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    Hmm I'm doing cash management at the moment too but worked it out at 4 months.

    I did 4 months for raw materials + 1 further month to sell the stock + 2 further months before the debtors pay = 7 months. You pay your suppliers after 3 months so 7 - 3 = 4 months

    If thats incorrect could someone please tell me where I'm going wrong as I have my exam on Friday!
  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034 mod
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    take my word for it
    You are correct and to make it quite clear
    4 months
    Sandy
    sandy@sandyhood.com
    www.sandyhood.com
  • *Gems*
    *Gems* Registered Posts: 15 New contributor 🐸
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    Ahh right, just the OP said she thought the answer should be 3 months which I thought you said was correct, just confusing myself!
  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034 mod
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    I agree
    When I re-read my post I thought it wasn't clear so I edited the last one to add the 4 months.
    Sandy
    sandy@sandyhood.com
    www.sandyhood.com

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