Brown's Market currently has an operating cycle of 76.8 days.It is planning some operational changes that are expected to decrease the accounts receivable period by 2.8 days and decrease the inventory period by 3.1 days.The accounts payable turnover rate is expected to increase from 9 to 11.5 times per year.If all these changes are adopted,what will be the firm's new operating cycle?
A)68.4 days
B)73.4 days
C)63.3 days
D)57.9 days
E)70.9 days

Question

Quizplus · Accepted Answer

The new operating cycle is calculated by subtracting the decrease in the accounts receivable period (2.8 days) and the decrease in the inventory period (3.1 days) from the current operating cycle (76.8 days). This results in a new operating cycle of 70.9 days. The accounts payable turnover rate does not directly affect the operating cycle calculation.

Brown's Market Currently Has an Operating Cycle of 76