Asked by Danielle O'Brien on Apr 28, 2024
Verified
The operating cycle is typically defined as the time it requires to convert
A) cash to inventory to receivables
B) raw materials to finished goods
C) finished goods to receivables to cash
D) cash to inventory to receivables to cash
Operating Cycle
An operating cycle is the average period of time it takes for a business to convert its inventory into cash proceeds from sales.
Receivables
Amounts owed to a company by customers for goods or services that have been delivered or used but not yet paid for.
Raw Materials
Basic materials and substances used in the initial production or manufacturing of goods.
- Comprehend how operating cycles influence the categorization of liabilities.
Verified Answer
MU
Mounika UppalaMay 03, 2024
Final Answer :
D
Explanation :
The operating cycle is the time it takes for a company to purchase inventory, sell it to customers, and collect the cash from the sales, effectively turning cash back into cash. This cycle encompasses the process from cash to inventory to receivables and back to cash.
Learning Objectives
- Comprehend how operating cycles influence the categorization of liabilities.
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