Answer (D) is correct . The operating cycle is the time required to convert cash into inventory, sell that inventory for receivables, and collect cash in payment of the receivables. The operating cycle is therefore a cash-to-cash cycle: the time that a company holds inventory before sale plus the time that it holds receivables before collection. Dividing the receivables turnover of 3.65 into 365 days gives the average credit period (100 days). Dividing the inventory turnover of 3.30 into 365 days gives the average holding period (110.6 days). The sum of the inventory holding period and the credit period is the operating cycle (210.6 days).
Answer (A) is incorrect because The average credit period equals 100.0 days (365 days ¡Â 3.65).
Answer (B) is incorrect because The average of the average credit period and the average holding period is 105.3 days [(100.0 + 110.6) ¡Â 2].
Answer (C) is incorrect because The average holding period is equals 110.6 days (365?¡Â 3.30).< |
The approximate number of days in White’s operating cycle is
