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Bradley's has an inventory turnover rate of 8, a payables turnover rate of 7, and a receivables...

Question:

Bradley's has an inventory turnover rate of 8, a payables turnover rate of 7, and a receivables turnover rate of 11.

How long is the firm's operating cycle?

A. 45.06 days

B. 78.81 days

C. 75.63 days

D. 30.13 days

E. 26.67 days

Operating Cycle:

The operating cycle is the time required for the company for the production of goods, selling them to the customers, and receiving the payments. The duration of the operating cycle is calculated in days.

Answer and Explanation: 1

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Correct answer: B. 78.81 days


Workings:

{eq}\begin{align*} {\rm\text {Inventory period}} &= \frac{{365}}{{{\rm\text {Inventory turnover}}}}\\ &=...

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Operating Cycle in Accounting: Definition & Formula

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Chapter 22 / Lesson 42
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An operating cycle consists of lead time, production time, sales time, delivery time, and cash-collection time. Learn the definitions of the parts of the operating cycle, how long the operation cycles are for different industries, and the formula used for calculating the operating cycle in accounting.


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