Sales: $460,000
Accounts Receivable Balance: $40,000
Cost of Goods Sold: $300,000
Inventory Balance: $87,000
Accounts Payable Balance: $25,000
Calculate the following matrics:
A/R days
Inventory days
A/P days
Cash-to-Cash days
When making your calculations, please follow conventional rules for rounding up or down to arrive at your answer.

A/R days
Inventory days
A/P days
Cash-to-Cash days

A/ R Days ; 32 days

Inventory Days : 106 days

A/P Days: 49 days

Cash to cash Days: 89 days

Explanation:

Computation of A/R days

Accounts Receivables days are calculated by first determining the daily credit sales by dividing the annual credit sales amount with 365.

The receivable balance is then divided by the average daily credit sales to get the  receivable days

Annual Sales $ 460,000/ 365 days = Average Daily Sales = $ 1260.27

Receivable Days = Receivable Balance  $ 40,000/ $ 1260.27 = 32 days (rounded)

Computation of Inventory days

Inventory days are calculated by first determining the daily cost of goods sold  by dividing the annual cost of goods sols with 365.

The inventory  balance is then divided by the average daily cost of goods sold to get the  inventory days

Cost of goods sold $ 300,000 / 365 days = $ 821.92

Inventory Days = Inventory balance / Average daily cost of goods sold

$ 87,000/ $ 821.92 = 106 days

Computation of A/P days

Accounts Payables  days are calculated by first determining the daily credit purchases by dividing the annual purchases  amount with 365.

The payable balance is then divided by the average daily purchases  to get the payable days.

Since the purchase data is not provided we assume that the cost of goods sold is the credit purchases

Cost of goods sold $ 300,000 / 365 days = $ 821.92

Payable Days = Payables balance / Average daily cost of goods sold

$ 40,000/ $ 821.92 = 49 days

Cash to Cash Days

The cash to cash days is the period of converting the receivables and inventory balances to cash. It is calculated by the following formula

A/R Days + Inventory Days - A/P days

32 + 106 -49 = 89 days

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