The difference between a firm's operating cycle and its cash cycle is:
A)there is no difference between the cash and operating cycles.
B)its account receivable days.
C)its accounts payable days.
D)its inventory days.

Question

Quizplus · Accepted Answer

The difference between a firm's operating cycle and its cash cycle is its accounts payable days. The operating cycle measures the time between purchasing inventory and collecting cash from selling that inventory, while the cash cycle subtracts the period the company is able to delay payment of its own purchases (accounts payable days) from the operating cycle, thus showing the actual time cash is tied up in operations.

The Difference Between a Firm's Operating Cycle and Its Cash