The two components of the operating cycle are:

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The two components of the operating cycle are the average days of revenues in inventory and the average collection period. The average days of revenues in inventory is the amount of time it takes for a company to sell its inventory and generate revenue from it. The average collection period is the amount of time it takes for a company to collect payment from its customers after making a sale. These two components together represent the amount of time it takes for a company to convert its inventory and accounts receivable into cash, which is the operating cycle.

The Two Components of the Operating Cycle Are