Question

22. Which of the following statements regarding operating and cash cycles is true?             Operating cycle...

22. Which of the following statements regarding operating and cash cycles is true?

           

Operating cycle is the length of time between the acquisition of inventory and

       the payment for inventory.

The length of time between the acquisition of inventory and its sale is called

       the days sales outstanding.

Accounts receivable period is the length of time between the sale of inventory

and the collection of cash from receivables

The length of time between the payment for inventory and the sale of  

inventory is called the cash cycle.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Cash / Operating cycle - Time between payment to supplier for raw material and getting payments from customer for selling finish goods inventory. Hence, Last statement is true for cash operating cycle.

1st statement talks about acquisition of inventory , no specifically talking about supplier's payment. 2nd statement is not corrent for DSO - DSO = (Account Receivable / Sales ) x 365 days. 3rd Statement talks about working capital management, not about cash cycle.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which action would NOT be likely to shorten the length of the cash conversion cycle? a....
Which action would NOT be likely to shorten the length of the cash conversion cycle? a. adopting a new inventory system that reduces the inventory conversion period b. reducing the average DSO on its accounts receivable c. reducing the amount of time the company takes to pay its suppliers d. increasing sales while maintaining the same level of receivables
1. You have the following information: Accounts receivable                       $160,000 Total credit sales $2,500,000 Assume a 360...
1. You have the following information: Accounts receivable                       $160,000 Total credit sales $2,500,000 Assume a 360 day year and compute the receivables collection period. 2.Inventory conversion period 15 days Closing inventory $28,000 Compute C O G S (assuming a 360 day year). 3.Inventory conversion period                      68.2 days Receivables collection period 35.8 days Payables deferral period 24.6 days Compute the cash conversion cycle: 4.Inventory conversion period 55.8 days Days sales outstanding 23.9 days Days payables outstanding 32.5 days The cash conversion...
An increase in which one of the following will decrease the cash cycle, all else equal?...
An increase in which one of the following will decrease the cash cycle, all else equal? A. Payables turnover B. Days sales in inventory C. Operating cycle D. Inventory turnover rate E. Accounts receivable period
8. Calvani, Inc., has a cash cycle of 44.5 days, an operating cycle of 65 days,...
8. Calvani, Inc., has a cash cycle of 44.5 days, an operating cycle of 65 days, and an inventory period of 28 days. The company reported cost of goods sold in the amount of $344,000, and credit sales were $567,000.    What is the company’s average balance in accounts payable and accounts receivable? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)    Average accounts payable $ Average accounts receivable $
Holding other factors the same, which of the following will cause both the Operating Cycle and...
Holding other factors the same, which of the following will cause both the Operating Cycle and the Cash Cycle to decrease? Decreasing the Inventory Turnover from 7 times to 6 times Decreasing the Accounts Receivables Turnover from 7 times to 6 times None of the other answer choices are correct Increasing the Inventory Period by 7 days while simultaneously increasing the Accounts Payable period by 8 days Increasing the average Inventory balance Decreasing the Inventory Period by 7 days while...
The cash cycle is the difference between the: Select one: a. operating cycle and accounts payable...
The cash cycle is the difference between the: Select one: a. operating cycle and accounts payable period b. accounts payable and accounts receivable period c. operating cycle and accounts receivable period d. operating cycle and activity cycle
Problem 16-11 Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 62 days, an...
Problem 16-11 Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 62 days, an average collection period of 35 days, and a payables deferral period of 36 days. Assume that cost of goods sold is 80% of sales. Assume 365 days in year for your calculations. What is the length of the firm's cash conversion cycle?   days If Negus's annual sales are $3,705,000 and all sales are on credit, what is the firm's investment in accounts receivable? Round...
Problem 21-11 Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 59 days, an...
Problem 21-11 Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 59 days, an average collection period of 47 days, and a payables deferral period of 31 days. Assume that cost of goods sold is 80% of sales. Assume 365 days in year for your calculations. What is the length of the firm's cash conversion cycle? days If Negus's annual sales are $3,651,525 and all sales are on credit, what is the firm's investment in accounts receivable? Round...
Which one of the following statements is correct if a firm has a receivables turnover of...
Which one of the following statements is correct if a firm has a receivables turnover of 11? Assume 365-day year.    a. It takes the firm 11 days to collect payment from its customers.     b. The firm collects its credit sales in an average of 33.18 days.     c. It takes the firm 33.18 days to sell its inventory and collect the payment from the sale.     d. The firm collects its credit sales in an average of 36.5...
DJ Inc.'s CFO would like to decrease its cash conversion cycle by 10 days (based on...
DJ Inc.'s CFO would like to decrease its cash conversion cycle by 10 days (based on a 365 day year). The company carries average inventory of $750,000. Its annual sales are $10 million, its cost of goods sold is 75% of annual sales, and its average collection period is twice as long as its inventory conversion period. The firm buys on terms of net 30 days, and it pays on time. The CFO believes he can reduce the average inventory...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT