When does the operating cycle for a merchandiser begin?

Question:

When does the operating cycle for a merchandiser begin?

Operating Cycle of Merchandiser:

An operating cycle of merchandise entails its acquisition from the vendors, its preparation for sale, disposing of them in the market, and receiving finances in the form of payments for the commodities and services. Therefore, available finances in the business within a given period grants the company to undertake the operations involving merchandise.

Answer and Explanation:

The operating cycle for a merchandiser starts upon stock supplies from its vendors upon an order made. It continues until the stock is disposed of to the market and brings back finances for payments by the customers. Therefore, the shorter the operating cycle, the more the business can accumulate more earnings since fewer prices are experienced within the short period.


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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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