Asked by Jordan Canales on Jul 27, 2024
Verified
Dexter and Francis Merchants (DFM) sell their inventory in 94 days on average. Their average customer charges purchase on a credit card whereby payment is received in 6 days. On the other hand, DFM takes 47 days on average to pay for their purchases. Given this information, what is the length of DFM's operating cycle?
A) 53 days
B) 88 days
C) 100 days
D) 135 days
E) 141 days
Operating Cycle
The time period between the acquisition of inventory by a business and the collection of cash from accounts receivable.
Inventory
The total amount of goods or materials held by a company for the purpose of resale or production.
Credit Card
A payment card issued to users as a method of payment allowing the cardholder to pay for goods and services based on the holder's promise to pay for them.
- Evaluate company efficiency by calculating the operating cycle and inventory turnover.
- Understand how operational cycles, including collection and payment periods, affect company liquidity.
Verified Answer
Learning Objectives
- Evaluate company efficiency by calculating the operating cycle and inventory turnover.
- Understand how operational cycles, including collection and payment periods, affect company liquidity.
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