A firm has an operating cycle of 120 days, an average collection period of 40 days, and an average payment period of 30 days. The firm's average age of inventory is ________ days.
A) 80
B) 50
C) 90
D) 70

Question

Quizplus · Accepted Answer

The operating cycle is the sum of the average age of inventory and the average collection period. Given an operating cycle of 120 days and an average collection period of 40 days, the average age of inventory is 120 - 40 = 80 days.

A Firm Has an Operating Cycle of 120 Days, an Average