Firms with short operating cycles will experience less of a lag between the creation and delivery of their products and the collection of cash from customers, for this reason
A) their cash flow from operations will be much greater than their working capital from operations.
B) their cash flow from operations will not differ much from their working capital from operations.
C) their cash flow from operations will be much less than their working capital from operations.
D) there will be no relation between their cash flow from operations and working capital from operations.

Question

Quizplus · Accepted Answer

Firms with shorter operating cycles will receive payment from customers faster and will be able to convert their inventory into cash more quickly. This means that the difference between their cash flow from operations and their working capital from operations will not be significant. Therefore, their cash flow from operations will not differ much from their working capital from operations.

Firms with Short Operating Cycles Will Experience Less of a Lag