Operating cycle: All Stars Ltd has inventory of $44,233 and cost of sales of $512,902. The company has an operating cycle of 74 days. What is the company's days' sales outstanding (DSO)?
A) 43 days
B) 32 days
C) 49 days
D) 26 days

Question

Quizplus · Accepted Answer

The operating cycle is the sum of the inventory period and the days' sales outstanding (DSO). First, calculate the inventory period: Inventory Period = (Inventory / Cost of Sales) * 365 = ($44,233 / $512,902) * 365 = 31.5 days. Then, DSO = Operating Cycle - Inventory Period = 74 days - 31.5 days = 42.5 days, which rounds to 43 days.

Operating Cycle: All Stars Ltd Has Inventory of $44,233 and Cost