The operating cycle is the inventory conversion period plus the accounts receivable period.

Question

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The operating cycle is the time it takes for a company to convert its inventory into cash. This includes the inventory conversion period (the time it takes to acquire and sell inventory) and the accounts receivable period (the time it takes to collect payment for the sold inventory). Therefore, the operating cycle is the sum of these two periods.

The Operating Cycle Is the Inventory Conversion Period Plus the Accounts