A firm has an inventory turnover rate of 18, a receivables turnover rate of 23, and a payables turnover rate of 12. How long is the operating cycle?

Question

Quizplus · Accepted Answer

The operating cycle is calculated as the sum of the inventory period and the receivables period. Inventory period = 365 / Inventory turnover rate = 365 / 18 = 20.28 days. Receivables period = 365 / Receivables turnover rate = 365 / 23 = 15.87 days. Operating cycle = 20.28 + 15.87 = 36.15 days.

A Firm Has an Inventory Turnover Rate of 18, a Receivables