Asked by Jawwad Siddiqui on Jul 07, 2024
Verified
The formula (Cash cycle - accounts payable period) correctly defines the operating cycle.
Cash Cycle
The duration between the initial investment in inventory and receiving cash from sales of the inventory.
Accounts Payable Period
The average period it takes for a company to pay off its suppliers, calculated by dividing accounts payable by the average daily purchases.
Operating Cycle
The time period that starts with the purchase of raw materials and ends with the collection of receivables generated from sales, measuring how long it takes for a business to turn expenditures into cash from sales.
- Comprehend the elements and computations involved in the operating and cash cycles.
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Learning Objectives
- Comprehend the elements and computations involved in the operating and cash cycles.
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