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Explain how the length of the operating cycle affects the amount of funds invested in accounts...

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Explain how the length of the operating cycle affects the amount of funds invested in accounts receivable and inventories.

Operating Cycle

Operating cycle refers to number of days a company takes to sell stock and collect cash from the sales. In other words the operating cycle is the average period of time required for a business to make an initial investment of cash to produce,sell and receive cash from customers.(collect account receivable).

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Operating cycles determine cash flow of a business. A short operating cycle enable the company to have cash to pay the current liabilities as and when...

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Operating Cycle & Cash Cycle: Definition & Calculations

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Chapter 17 / Lesson 2
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The operating cycle and cash conversion cycle are both tools to evaluate the timeline of when a business will become profitable. Explore the calculations of each, and identify their importance to a business.


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