How to calculate the operating cycle?
Understand the Problem
The question is asking for the method to calculate the operating cycle, which involves understanding and applying specific formulas related to inventory and accounts receivable.
Answer
Inventory Period + Accounts Receivable Period
The final answer is Inventory Period + Accounts Receivable Period
Answer for screen readers
The final answer is Inventory Period + Accounts Receivable Period
More Information
The operating cycle represents the average time it takes for a business to turn its inventory into cash. It's an important measure of operational efficiency.
Tips
Ensure the correct turnover ratios are used when calculating Inventory and Accounts Receivable periods.
Sources
- Learn How to Calculate the Operating Cycle - corporatefinanceinstitute.com
- How to Calculate Operating Cycle? - Wall Street Prep - wallstreetprep.com
- What Is an Operating Cycle? Plus How To Calculate It | Indeed.com - indeed.com
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