FSA: sample exam: q22: Ready Power Inc.

q22, what is DOH? periodic or a perpetual counting system? what is cash conversion cycle? Thanks.

DOH = Days of Inventory on hand = 365/Inventory Turnover = 365/ (COGS/Avg Inventory) Perpetual counting system is an inventory cost flow method. Instead of valuin ginventory at year end (under FIFO or LIFO), it is constantly updated. Cash Conversion cycle is = Days Sales Outstanding + Days inventory on hand - Days of payables =365/AR Turnover + 365/Inventory Durnover - 365/Payables turnover = 365/ (sales/avg receivables) + 365/(COGS/avg inventory) - 365/(purchases/avg payables). Going back to LI, does anyone remember the difference between Cossh conversion and operating cycle? is operating cycle just DSO + DOH?

yes Op cycle =DSo+DOH

We need to know this?

I have no idea. I was just answering the question haha.