Which of the following statements is true?
A) The inventory period of the operating cycle ends when the receivable it creates is actually paid for by the customer.
B) The length of the operating cycle is always greater than or equal to the length of the cash cycle.
C) The accounts receivable period is always greater than or equal to the length of the cash cycle.
D) The inventory period plus the accounts receivable period is equal in length to the operating cycle plus the cash cycle.
E) The accounts payable period ends when the inventory is sold.

Question

Quizplus · Accepted Answer

The length of the operating cycle, which includes both the inventory period and the accounts receivable period, is always greater than or equal to the length of the cash cycle because the cash cycle also accounts for the accounts payable period, effectively shortening the time between cash outlay for inventory and cash receipt from sales.

Which of the Following Statements Is True