Your ﬁrm currently has an operating cycle of 64 days. You are analyzing some operational changes which are expected to decrease the accounts receivable period by 3 days and decrease the
Inventory period by 2 days. The accounts payable turnover rate is expected to increase from 7 to 9
Times per year. If all of these changes are adopted, what will your ﬁrm's new operating cycle be?

Question

Quizplus · Accepted Answer

The new operating cycle is calculated by subtracting the decrease in accounts receivable (3 days) and inventory period (2 days) from the original operating cycle (64 days), resulting in 59 days. The change in accounts payable turnover does not affect the operating cycle calculation.

Your ﬁRm Currently Has an Operating Cycle of 64 Days