{"id":43334,"date":"2025-06-29T18:27:13","date_gmt":"2025-06-29T18:27:13","guid":{"rendered":"https:\/\/gaviki.com\/blog\/?p=43334"},"modified":"2025-06-29T18:27:14","modified_gmt":"2025-06-29T18:27:14","slug":"using-the-following-information-and-the-bardahl-formula-calculate-the-operating-cycle-and-working-capital-needs-of-t","status":"publish","type":"post","link":"https:\/\/gaviki.com\/blog\/using-the-following-information-and-the-bardahl-formula-calculate-the-operating-cycle-and-working-capital-needs-of-t\/","title":{"rendered":"Using the following information and the Bardahl formula, calculate the operating cycle and working capital needs of T"},"content":{"rendered":"\n
Using the following information and the Bardahl formula, calculate the operating cycle and working capital needs of T Corporation who has operating expenses of 282,000 307,000 Ending Inventory 42,500 33,800 36,200 COGS Total 190,000 210,000 240,000 Purchases 171,000 196,000 210,000 Accounts Receivable 48,000 49,000 52,000 Accounts Payable 70,000 67,000 59,000 Inventory Cycle: A\/R Cycle: A\/P Cycle: Total: Working Capital Needs:<\/p>\n\n\n\n
The Correct Answer and Explanation <\/mark>is:<\/strong><\/p>\n\n\n\n
To calculate the operating cycle and working capital needs for T Corporation, we’ll first need to compute the following:<\/p>\n\n\n\n
1. Inventory Cycle:<\/strong><\/h3>\n\n\n\n
This refers to the number of days it takes to sell inventory. The formula for the inventory cycle<\/strong> is: Inventory Cycle=Average InventoryCOGS per Day\\text{Inventory Cycle} = \\frac{\\text{Average Inventory}}{\\text{COGS per Day}}Inventory Cycle=COGS per DayAverage Inventory\u200b<\/p>\n\n\n\n
Where:<\/p>\n\n\n\n
\n
Average Inventory<\/strong> = (Beginning Inventory + Ending Inventory) \/ 2<\/li>\n\n\n\n
COGS per Day<\/strong> = COGS \/ 365<\/li>\n<\/ul>\n\n\n\n
For Year 1<\/strong>:<\/p>\n\n\n\n
\n
Average Inventory = (42,500 + 33,800) \/ 2 = 38,150<\/li>\n\n\n\n
COGS per Day = 190,000 \/ 365 \u2248 520.55<\/li>\n<\/ul>\n\n\n\n
This measures the number of days it takes to collect accounts receivable. The formula for the A\/R cycle<\/strong> is: A\/R Cycle=Average Accounts ReceivableCredit Sales per Day\\text{A\/R Cycle} = \\frac{\\text{Average Accounts Receivable}}{\\text{Credit Sales per Day}}A\/R Cycle=Credit Sales per DayAverage Accounts Receivable\u200b<\/p>\n\n\n\n
This measures the number of days it takes to pay accounts payable. The formula for the A\/P cycle<\/strong> is: A\/P Cycle=Average Accounts PayablePurchases per Day\\text{A\/P Cycle} = \\frac{\\text{Average Accounts Payable}}{\\text{Purchases per Day}}A\/P Cycle=Purchases per DayAverage Accounts Payable\u200b<\/p>\n\n\n\n
The operating cycle<\/strong> is the total time it takes for a company to convert its inventory into cash. It is the sum of the Inventory Cycle and the A\/R Cycle: Operating Cycle=Inventory Cycle+A\/R Cycle\\text{Operating Cycle} = \\text{Inventory Cycle} + \\text{A\/R Cycle} Operating Cycle=Inventory Cycle+A\/R Cycle<\/p>\n\n\n\n
Working capital is the capital needed to fund the operating cycle. The formula for working capital needs<\/strong> is: Working Capital Needs=Operating Cycle\u00d7Average Daily Operating Expenses\\text{Working Capital Needs} = \\text{Operating Cycle} \\times \\text{Average Daily Operating Expenses}Working Capital Needs=Operating Cycle\u00d7Average Daily Operating Expenses<\/p>\n\n\n\n
Where:<\/p>\n\n\n\n
\n
Average Daily Operating Expenses<\/strong> = Operating Expenses \/ 365<\/li>\n<\/ul>\n\n\n\n
For Year 1<\/strong>:<\/p>\n\n\n\n
\n
Average Daily Operating Expenses = 282,000 \/ 365 \u2248 772.60<\/li>\n<\/ul>\n\n\n\n
Working Capital Needs = 166.5 * 772.60 \u2248 128,314.90<\/p>\n\n\n\n
Working Capital Needs<\/strong>: 128,314.90<\/li>\n<\/ul>\n\n\n\n<\/figure>\n","protected":false},"excerpt":{"rendered":"
Using the following information and the Bardahl formula, calculate the operating cycle and working capital needs of T Corporation who has operating expenses of282,000307,000 Ending Inventory 42,500 33,800 36,200 COGS Total 190,000 210,000 240,000 Purchases 171,000 196,000 210,000 Accounts Receivable 48,000 49,000 52,000 Accounts Payable 70,000 67,000 59,000 Inventory Cycle: A\/R Cycle: A\/P Cycle: Total: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-43334","post","type-post","status-publish","format-standard","hentry","category-quiz-questions"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/43334","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=43334"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/43334\/revisions"}],"predecessor-version":[{"id":43346,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/43334\/revisions\/43346"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=43334"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=43334"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=43334"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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