Which one of the following statements about the operating cycle is correct?
a) The operating cycle illustrates the sources and uses of cash.
b) The operating cycle is equal to the cash cycle plus the accounts receivable period.
c) The operating cycle begins when a product is sold to a customer.
d) The operating cycle is based on a 360-day year.
e) The operating cycle describes how a product moves through the current asset accounts.
The operating cycle is the period of time required for a firm to return their investment or capital from purchasing of goods, sell it into the customers up to the collection of the receivables to the customers.
Answer and Explanation: 1
The correct answer is a) The operating cycle illustrates the sources and uses of cash.
The operating cycle starts when the firm buys inventory for...
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fromChapter 22 / Lesson 42
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.