The difference between a firm's operating cycle and its cash cycle is:
A)its account receivable days.
B)its accounts payable days.
C)its inventory days.
D)how inventory is calculated.
E)how sales are calculated.

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 how long the firm's cash is tied up in the production and sales process.

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