A firm's inventory conversion period is 40 days and its receivables collection period is 25 days. What is its operating cycle?
Correct answer: C. 65 days
- A. 15 days
- B. 40 days
- C. 65 days
- D. 75 days
Explanation
The operating cycle is the inventory conversion period plus the receivables collection period. It is therefore 40 plus 25, or 65 days; the payables period is not deducted in this calculation.
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