Name: Edelberto N.

Anilao III
Section: 12-ABM-2

1. On December 31, 2016, IZZY Corporation presents the following information

in its financial statements :

From the Statement of Financial Position

Cash Php 900 000
Accounts Receivables 1 400 000
Inventory 850 000
Prepaid Items 90 000
Accounts Payables 550 000

From the Statement of Comprehensive Income

Sales Php 7 800 000
Cost of Sales 5 460 000
Operating Expenses 1 450 000
Financing Charges 150 000

REQUIRED : Compute the following :

1. Inventory Conversion Period

Inventory Conversion Period = Inventory

Cost of Sales per day

= 850 000
(5 460 000/360)

= 850 000
15,166.67

= 56 Days

2. Receivable Collection Period

Receivable Collection Period = Receivables

Sales /360

= 1 400 000
(7 800 000/360)

= 1 400 000
21,666.67

= 65 Days
3. Payable Deferral Period

Payable Deferral Period = Payables

Cost of Sales /360

= 550 000
(5 460 000/360)

= 550 000
15,166.67

= 36 Days

4. Cash Conversion Cycle

Using the computed amounts, the cash conversion cycle of IZZY Corporation is
computed as follows :

CCC = Inventory Conversion Period + 56

Receivable Collection Period - 65
Payable Deferral Period 36
= 85 Days