Bonito Fine Drapery Ltd. requires a deposit of 50% of the total cost of draperies from its customers on the date the contract is signed and requires final cash payment on the date of installation. It purchases materials immediately for each order and gets same-day delivery on fabric, trim and drapery hardware. Including the occasional delays and rescheduling of installation dates, the final payment is usually made an average of 20 days after the initial order is signed. The company always pays its suppliers in 30 days. What is the length of the company's operating cash cycle?

Question

Quizplus · Accepted Answer

The operating cash cycle is zero days because the company receives a 50% deposit upfront and the final payment is made before the company pays its suppliers, resulting in no gap between cash inflows and outflows.