A firm's operating cycle is equal to its ______.
I. inventory conversion period plus receivables conversion period
II. cash conversion cycle minus payables deferral period
A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements I and II are correct.
D) Neither statement I nor II is correct.

Question

A firm's operating cycle is equal to its ______. 
I. inventory conversion period plus receivables conversion period
II. cash conversion cycle minus payables deferral period
A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements I and II are correct.
D) Neither statement I nor II is correct.

Quizplus · Accepted Answer

The operating cycle is the time it takes for a company to purchase inventory, sell it, and collect the cash from sales. It is calculated as the inventory conversion period plus the receivables conversion period. The cash conversion cycle, on the other hand, is the operating cycle minus the payables deferral period.

A Firm's Operating Cycle Is Equal to Its ______