Assuming a retailer buys and sells on 30 days credit and from the date of purchase it takes, on average, 14 days to sell inventory. What is the correct order for the steps in the operating cycle?
I Sell goods to customer
II Collect cash from customer
III Pay supplier
IV Buy goods for resale from supplier

Question

Quizplus · Accepted Answer

The correct order for the operating cycle is as follows:
1. Buy goods for resale from supplier (IV)
2. Sell goods to customer (I)
3. Collect cash from customer (II)
4. Pay supplier (III)

This means that the retailer first purchases inventory (IV), then sells it to customers (I), collects payment from the customers (II), and finally pays the supplier for the inventory purchased (III). Choice C is therefore the correct answer.

Assuming a Retailer Buys and Sells on 30 Days Credit