Final answer:
Yes, the operating cycle of a service company is usually shorter than that of a merchandising company.
Step-by-step explanation:
The operating cycle refers to the time it takes for a company to convert its assets into cash. In general, the operating cycle of a service company is usually shorter than that of a merchandising company.
Service companies typically do not carry inventory and do not engage in the buying and selling of goods. Instead, they provide services directly to customers, such as consulting, healthcare, or hospitality. As a result, their operating cycle involves gathering customer requirements, delivering the service, and receiving payment, which can often be completed quickly.
In contrast, merchandising companies purchase inventory, hold it in stock, and then sell it to customers. Their operating cycle includes the time it takes to acquire inventory, sell it to customers, and collect payment. This process can take longer than the operating cycle of a service company, as there are additional steps and potential delays involved.