The following statements are true regarding the operating cycle of a merchandising company except:
A)The operating cycle begins with the purchase of merchandise.
B)The operating cycle is shortened by credit sales.
C)The operating cycle ends with the collection of cash from the sale of merchandise.
D)The operating cycle can vary in length among different merchandising companies.
E)The operating cycle sometimes involves accounts receivable.

Question

Quizplus · Accepted Answer

The operating cycle of a merchandising company begins with the purchase of merchandise, followed by inventory storage, then sale of inventory, and ends with the collection of cash from the sale of merchandise. The operating cycle can vary in length depending on the individual company's business practices. The operating cycle often involves accounts receivable as customers may purchase on credit and owe the company money. However, credit sales do not shorten the operating cycle as they increase the amount of time it takes to collect cash from the sale.

The Following Statements Are True Regarding the Operating Cycle of a Merchandising