Answer:
c. The current operating cycle or 1 year, whichever is longer.
Step-by-step explanation:
As we know that
Current assets are comprised of cash & cash equivalents, inventory, account receivable, prepaid insurance, short term investment, and other current asset. These current asset is also known as the liquid asset that determines that these item would be converted into cash within one year
And the operating cycle would be the time between the material purchase and actual cash received.
So, The operating cycle = Days inventory outstanding + days sale outstanding
where,
Day inventory outstanding = (Beginning inventory + ending inventory) ÷ cost of goods sold × number of days in a year
Day sale outstanding = (Beginning Accounts receivable + ending Accounts receivable) ÷ Net sales × number of days in a year
Therefore, The collection period would be the maximum of the current operating cycle or 1 year.