- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 11. Financial Analysis Techniques
- Subject 3. Liquidity Ratios
CFA Practice Question
True or False?
If a company averages 85 days to sell a machine and it averages 45 days to collect the receivable for the machine, the operating cycle is about 40 days.
Correct Answer: False
An average of 85 days to sell the product and 45 days to collect the account receivable results in an operating cycle of approximately 130 days (85 days + 45 days = 130 days).
User Contributed Comments 9
| User | Comment |
|---|---|
| chenyx | operating cycle=inventory period + collection period cash conversion cycle= operating cycle - payment period |
| cleopatraliao | chenyx: r u sure what ur sayin is correct? |
| thekobe | cleo that is correct, cash conversion= days receivables + days inventory - days payable |
| johntan1979 | General consensus: CCC = OC |
| strivealex | Operating Cycle is different from CCC Operating Cycle = DOS + DOI CCC = DOS + DOI - No. of days Payable |
| Shaan23 | johnatan has been pretty good commenting throughout but he's off on this one... strivealex is correct |
| adidasler | people need to stop looking at the formula and just read ... this is an obvious question ... this isn't CFA material .. this is just common sense ... read again |
| Inaganti6 | Johntan your lack of veracity is quite surprising. you've been a spectacular commentator throughout and I kept thinking to myself this guy Johntan is going to ace this exam. CCC IS NOT OC. OC - A/C Payables Period = CCC. |
| FozzeyBear | johntan1979 lies to the other test takers once again |