Ask Question
BusinessBusiness
11 June, 03:39

On average, Furniture & More is able to sell its inventory in 54.2 days and takes 65.3 days on average to pay for its purchases. Its average customer pays with a credit card which allows the company to collect its receivables in 2.9 days. Given this information, what is the length of the operating cycle?

+3
Answers (1)
  1. 11 June, 05:00
    0
    The operating cycle of Furniture & More is 54.2+2.9 = 57.1 days

    Explanation:

    Operating cycle is amount of time required for the manufacturer's cash to be used to:

    1. pay for the raw materials needed in its products

    2. pay for the labor and overhead costs needed to convert the raw materials into products

    3. hold the finished products in inventory until they are sold

    4. wait for the customers' cash payments to be collected

    In case of Furniture & More the operating cycle is the sum of the following:

    the days' sales in inventory meaning how many days the inventory is kept (365 days/inventory turnover ratio) which is 54.2

    plus

    the average collection period meaning how many days it takes to collect from customers (365 days/accounts receivable turnover ratio) which is 2.9.

    The 65.3 days on average to pay for its purchases is not relevant for the calculation of operating cycle
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “On average, Furniture & More is able to sell its inventory in 54.2 days and takes 65.3 days on average to pay for its purchases. Its ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Art Company issued 6%, 5 year bonds, with par value of $1,600,000, paying semiannual interest for $1,470,226. The annual market rate of interest on the date of issue was 8%.
Answers (1)
Which of the following interactions is consistent with the law of supply? Select the best answer from the choices provided. A. As the price of a product goes down, the quantity supplied goes up. B.
Answers (2)
Before you look for a job, what are three things you should consider about yourself?
Answers (2)
Pam runs a shoeshine stand at the airport. Pam has no skills, no job expereince, and no alternative employment. Entrepreneurs in the shoeshine stand business earn $20,000 a year.
Answers (1)
Transactions for the Sheldon Cooper Company, which provides welding services for the month of June are presented below. Identify the accounts to be debited and cred ited for each transaction.
Answers (1)
New Questions in Business
An advertiser enables target cost-per-acquisition (cpa) bidding and notices that conversions decrease. what might cause this?
Answers (1)
A trigger strategy is a strategy that: A. is not relevant to oligopolies. B. determines when to enter an industry. C. depends on an opponent's past decisions. D. tells a business to leave the industry because the price is below the AVC.
Answers (1)
What is the effect on the supply curve for skateboards if the government implements a tax on the manufacturing process?
Answers (1)
Cost of goods sold is: an asset account. a revenue account. an expense account. a permanent equity account.
Answers (1)
Markup represents an amount needed to cover operating expenses. a. True b. False
Answers (1)
Home » Business » On average, Furniture & More is able to sell its inventory in 54.2 days and takes 65.3 days on average to pay for its purchases. Its average customer pays with a credit card which allows the company to collect its receivables in 2.9 days.
Sign Up Forgot Password?