Asked by Sheridan Freeman on Apr 25, 2024
Verified
Which of the following is the best definition of operating cycle?
A) A written statement by a bank that money will be paid, provided conditions specified in the letter are met.
B) Short-term financing in which the factor purchases all of a firm's receivables and forwards the proceeds to the seller as soon as they are collected.
C) The time period between the acquisition of inventory and when cash is collected from receivables.
D) Loan negotiated with banks for day-to-day operations.
E) Costs that fall with increases in the level of investment in current assets.
Operating Cycle
The average time period between the acquisition of inventory by a business and the receipt of cash from the sale of that inventory.
Acquisition Of Inventory
The process of obtaining goods and materials for a company's operations, which could be for immediate use or to keep as stock for future sale or production.
Marketable Securities
Financial instruments that can easily be converted into cash, typically with high liquidity and short maturity periods.
- Elucidate the principle of the operating cycle and its constituent elements.
Verified Answer
HH
Hailey Harvey7 days ago
Final Answer :
C
Explanation :
The operating cycle refers to the time period between the acquisition of inventory and the collection of cash from receivables, which is accurately described in option C.
Learning Objectives
- Elucidate the principle of the operating cycle and its constituent elements.