A company's operating cycle might be measured as
A) Total asset turnover in days minus fixed asset turnover in days.
B) Total asset turnover in days minus fixed asset turnover in days minus inventory turnover in days minus accounts receivable turnover in days.
C) Inventory turnover in days plus accounts receivable turnover in days plus accounts payable turnover in days.
D) Inventory turnover in days plus accounts receivable turnover in days minus accounts payable turnover in days.

Question

Quizplus · Accepted Answer

The operating cycle of a company is the time it takes for a company to purchase inventory, sell it, and collect the cash from the sale. It is calculated as the sum of the inventory turnover in days (how quickly inventory is sold) and accounts receivable turnover in days (how quickly the company collects cash from its customers) minus accounts payable turnover in days (how quickly the company pays its suppliers). This reflects the net time the company's cash is tied up in its operations.

A Company's Operating Cycle Might Be Measured as