The ________ of a firm is the amount of time that elapses from the point when the firm inputs material and labor into the production process to the point when cash is collected from the sale of the finished product that contains these production inputs.
A) cash conversion cycle
B) average age of inventory
C) operating cycle
D) average collection period

Question

Quizplus · Accepted Answer

The operating cycle measures the amount of time it takes for a firm to convert raw materials and labor into finished products, and then sell those products to collect cash. It is a measure of a firm's efficiency in managing its resources and generating cash flow. The cash conversion cycle and average collection period are related measures, but focus more specifically on cash management and accounts receivable, respectively. The average age of inventory is also related, but only measures the average amount of time inventory is held before being sold.

The ________ of a Firm Is the Amount of Time