The operating cycle of a merchandising company isA) always one year in length. B) ordinarily longer than that of a service company. C) about the same as that of a service company. D) ordinarily shorter than that of a service company.

Answer: Option B

Explanation: Operating cycle refers to the time period taken by the firm to produce the commodity, then sell it and receive the cash.

In case of physical commodities, it takes time for a firm to procure raw materials and produce the goods also the payments from the debtors take time as the amount involved is high.

On the other hand the service company do not need to procure any raw material and services are provided not produced. Therefore, the operating cycle of service company is smaller than the manufacturing company.