Operating cycle is measured as
A) inventory turns minus average collection period.
B) inventory turns plus average collection period.
C) days' sales in inventory minus average collection period.
D) days' sales in inventory plus average collection period.

Question

Quizplus · Accepted Answer

The operating cycle is the amount of time it takes for a company to purchase inventory, sell it, and collect the cash from the sale. It is measured as the sum of the days' sales in inventory (the time it takes to sell the inventory) plus the average collection period (the time it takes to collect cash from customers). Therefore, option D is correct.

Operating Cycle Is Measured as