The operating cycle is equal to the:
A) cash cycle plus the accounts receivable period.
B) inventory period plus the accounts receivable period.
C) inventory period plus the accounts payable period.
D) accounts payable period minus the cash cycle.
E) accounts payable period plus the accounts receivable period.

Question

Quizplus · Accepted Answer

The operating cycle is the time it takes for a company to convert inventory into cash. It includes the inventory period (time to sell inventory), and the accounts receivable period (time to collect payment from customers). Therefore, the best choice is B, which is inventory period plus the accounts receivable period.

The Operating Cycle Is Equal to The