Asked by Jasneet Kaur Singh on Jul 05, 2024
Verified
Dallas and More (D&M) sells its inventory in 82 days on average. Its average customer charges his purchase on a credit card whereby payment is received in ten days. On the other hand, D&M takes 56 days on average to pay for its purchases. Given this information, what is the length of D&M's operating cycle?
A) 26 days
B) 36 days
C) 66 days
D) 92 days
E) 128 days
Operating Cycle
The duration between a company's purchase of inventory and the receipt of cash from accounts receivable, reflecting the efficiency of a company's cash flow.
Inventory
refers to the goods and materials a business holds for the ultimate goal of resale or production.
Credit Card
A payment card issued to users as a method of payment allowing the cardholder to borrow funds, typically at point of sale, under the condition of paying back the borrowed money plus interest.
- Acquire knowledge of and determine the components involved in the operating cycle.
Verified Answer
KJ
kingdom johnsonJul 08, 2024
Final Answer :
D
Explanation :
The operating cycle is the sum of the inventory period and the accounts receivable period. Here, it's 82 days (inventory period) + 10 days (accounts receivable period) = 92 days.
Learning Objectives
- Acquire knowledge of and determine the components involved in the operating cycle.