Operating Cycle in Accounting: Definition & Formula


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Why is understanding the operating cycle so important?

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1. Which of these components of operating cycle time would NOT be relevant for most retailers?

2. Given what you now know about operating cycle, what steps could a manufacturer take to reduce its operating cycle time?

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About This Quiz & Worksheet

This worksheet and quiz will teach you about operating cycles in accounting. Topics you will need to know for the quiz include the importance of understanding the accounting cycle and the relevancy of components of operating cycle time.

Quiz & Worksheet Goals

You can use these tools to test your ability to:

  • Identify steps a manufacturer could take to reduce operating cycle time
  • Determine a ratio that measures how well a company manages credit it gives to customers
  • Understand the primary reason for focusing on operating cycle

Skills Practiced

Some study skills that you'll get a chance to practice are:

  • Reading comprehension - ensure that you draw the most important information from the related lesson on an operating cycle in accounting
  • Critical thinking - apply relevant concepts to examine information about how well a company can manage its credit that it gives to customers in a different light
  • Information recall - access the knowledge you've gained regarding why an operating cycle is important

Additional Learning

This lesson will help you to learn more about operating cycles in accounting. The lesson is titled Operating Cycle in Accounting: Definition & Formula and it covers the following:

  • Define operating cycle
  • Understand lead time
  • Be able to explain sales time
  • Identify delivery time
  • Realize what is meant by 'cash collection time'
  • Calculate the operating cycle in real world applications