Which of the following statements about an operating cycle is true?
A)For all businesses the operating cycle is a year or less.
B)The operating cycle is useful in defining current assets.
C)The operating cycle is the difference between revenues and operating expenses.
D)An operating cycle is the time it takes from the sale of inventory until the collection of cash.

Question

Quizplus · Accepted Answer

The operating cycle is a fundamental concept in managing working capital, defining the period from when a company invests cash in inventory (or raw materials) until it receives cash from customer payments. This cycle helps in identifying what constitutes current assets, as these are expected to be liquidated within one operating cycle.

Which of the Following Statements About an Operating Cycle Is