The length of the operating cycle equals the days' sales uncollected plus the
A)days' payable.
B)days' inventory on hand.
C)receivable turnover.
D)payables turnover.

Question

Quizplus · Accepted Answer

The operating cycle is the amount of time it takes for a company to turn its inventory into cash flows from sales. It is calculated by adding the days' sales uncollected (how long it takes to collect cash from sales) to the days' inventory on hand (how long inventory is held before it is sold). Choices A, C, and D are not components of the operating cycle calculation.

The Length of the Operating Cycle Equals the Days' Sales