The length of time between the acquisition of inventory and the collection of cash from receivables is called the:
A) operating cycle.
B) inventory period.
C) accounts receivable period.
D) accounts payable period.
E) cash cyclE.

Question

Quizplus · Accepted Answer

The operating cycle is the time it takes for a company to purchase inventory, sell the inventory, collect payment from customers, and then repeat the cycle. It represents the complete time it takes to convert cash into inventory and then back into cash (receivables, then cash). The inventory period, accounts receivable period, and accounts payable period are all components of the operating cycle. However, the operating cycle encompasses the entire process. Therefore, option A is the correct answer.

The Length of Time Between the Acquisition of Inventory and the Collection