Which combination of ratios describes the length of the operating cycle?
A)Days in the Selling Period + Days in the Collection Period
B)Days in the Collection Period + Days in the Payment Period
C)Days in the Collection Period + Days in the Selling Period + Days in the Payment Period
D)Days in the Payment Period + Days in the Selling Period

Question

Quizplus · Accepted Answer

The operating cycle is the time it takes for a company to convert inventory into cash. This process consists of two parts: the selling period (the time it takes to sell inventory) and the collection period (the time it takes to collect cash from customers). Therefore, the combination of ratios that describes the length of the operating cycle is Days in the Selling Period + Days in the Collection Period.

Which Combination of Ratios Describes the Length of the Operating