A firm has an inventory turnover rate of 10, a receivables turnover rate of 14, and...
A firm has an inventory turnover rate of 10, a receivables turnover rate of 14, and a payables turnover rate of 12. How long is the operating cycle?
71.80 days
68.72 days
44.79 days
62.57 days
54.15 days
Homework Answers
Calculation of operating cycle:
Operating cycle= days sale of inventory + days sale outstanding
Days sale of inventory= 365/inventory turnover= 365/10= 36.5days
Days sale outstanding= 365/recievables turnover rate= 365/14= 26.07days
Operating cycle= 36.5+26.07= 62.57days
So correct answer is 62.57 days
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