In this video, learn how to use the average collection period and number of days' sales in inventory to understand a company's operating cycle.
- A company's operating cycle is the length of time … from when the company buys its inventory … until when the company collects the cash … associated with selling that inventory. … The total length of the operating cycle … is the sum of two time periods, … the number of days that elapse … from the purchase of inventory to when it's sold … plus the number of days from the sale of the inventory … until the customer pays in cash. … Walmart, for example, … sells the inventory that it purchases from Toro, … Proctor and Gamble, and its other suppliers … in an average of 42 days. … This number is called … the number of days' sales in inventory … and is computed as follows. … Inventory divided by average daily cost of sales. … And average daily cost of sales … is just the annual cost of sales divided by 365 days. … Using the numbers for Walmart … for the year ending January 31st, 2019, … the number of days' sales in inventory … is computed as follows. … 44.269 billion divided by 1.056 billion, …
- Accounting basics
- Reviewing the balance sheet and income statement
- Credits, debits, and journal entries
- Making financial statements
- Issues in financial accounting
- Revenue recognition
- Deferring taxes
- Analyzing financial statements
Skill Level Beginner
Accounting Foundations: Internal Controlswith Kay Stice1h 46m Intermediate
Cost Accounting: Analyzing Product Profitabilitywith Rudolph Rosenberg56m 49s Intermediate
Why financial accounting?1m 13s
1. Accounting Basics
The accounting equation3m 37s
2. The Financial Statement
3. The Mechanics of Accounting
4. Current Issues in Financial Accounting
5. Financial Statement Analysis
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