Question

A company has an accounts receivable turnover ratio of 146 times, and an inventory turnover ratio...

A company has an accounts receivable turnover ratio of 146 times, and an inventory turnover ratio of 73 times. What is the length of the company’s operating cycle?

A :

109.5 times

B :

219 days

C :

1.67 times

D :

7.5 days

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Homework Answers

Answer #1

Length of company's Operating cycle =7.5 days

Working notes for the above answer is as under

Operating Cycle

= Inventory Period + Accounts Receivable Period

Inventory Period

= 365 / Inventory Turnover

Inventory Period

= 365 / 73

=5

Accounts Receivable Period

= 365 / Receivables Turnover

Accounts Receivable Period

= 365 / 146

=2.5

Operating Cycle

= Inventory Period + Accounts Receivable Period

=5+2.5

=7.5

Length of company's Operating cycle =7.5 days

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