Which ratio measures the length of time between the purchase of inventory and the eventual collection of cash from sales?
A) Quick ratio
B) Cash-to-cash operating cycle ratio
C) Accounts receivable turnover ratio
D) Inventory turnover ratio

Question

Quizplus · Accepted Answer

The cash-to-cash operating cycle ratio measures the amount of time it takes for a company to pay for inventory, sell it, and finally collect cash from the sale of that inventory. This ratio includes both the inventory turnover ratio and the accounts receivable turnover ratio, but also takes into account the amount of time it takes for the company to pay its own bills. Therefore, option B is the best choice.

Which Ratio Measures the Length of Time Between the Purchase