Question

The operating cycle of a company is the average time that is required to go from cash to:

- cash in producing revenues
- accounts receivable in producing revenues
- sales in producing revenues
- inventory in producing revenues

Answer 1

The operating cycle is the time it takes to turn cash into more cash through business operations, from purchasing inventory to generating sales and collecting receivables.

The correct option is either as sales in producing revenues or cash in producing revenues.

Step-by-step explanation:

The operating cycle of a company is the average time required to convert cash into more cash through the process of producing and selling goods or services. This involves the entire process from making an initial cash investment in inventory to producing revenues and eventually returning to cash either as sales in producing revenues or cash in producing revenues through collections on accounts receivable.

Companies can reinvest their cash flows into the business to grow, by improving production technologies or purchasing new equipment, which can lead to economies of scale and increased efficiency.