Question

Which of the following best describes the operating cycle of a manufacturing company?

A. The operating cycle starts from purchasing (on credit or with cash) the inventory for the operations, and lasts until the receivables for the inventory sold on credit are collected back in cash.
B. The operating cycle starts from the moment when the payables for credit purchases must be settled, and lasts until the receivables for the inventory sold on credit are collected back in cash.
C. The operating cycle assumes that excess cash is a financial asset.
D. None of the above.

Answer 1

The operating cycle of a manufacturing company starts with purchasing inventory and lasts until the receivables for the sold inventory are collected.

Step-by-step explanation:

The operating cycle of a manufacturing company can be best described as follows:
Option A is the correct answer. The operating cycle starts with purchasing inventory for the operations, using either cash or credit. It then continues until the receivables for the inventory sold on credit are collected back in cash. This cycle involves the entire process of purchasing, producing, and selling goods, and includes the conversion of inventory into receivables.