CFA Practice Question

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CFA Practice Question

The ______ is the period of time required for a firm to acquire inventory, sell the finished goods, and collect the proceeds.
A. inventory period
B. operating cycle
C. cash cycle
Explanation: A. This period is not affected by the amount of time it takes to collect on a receivable.
C. This period measures the time it takes for cash to flow in once it has flowed out of the firm.

User Contributed Comments 4

User Comment
azramirza Does'nt colleting the proceeds represent account pyables and inflow of cash..???
mjs111 The question says "acquire inventory," not "pay for inventory." Since the company has only acquired the inventory it may or may not have paid for it yet, hence you can't be sure the question is referring to the cash conversion cycle.
Profache Operating Cycle = Acquire inventory and collect revenues.
Cash (conversion) Cycle = Acquire inventory, collect revenues, AND pay suppliers
hoyleng thanks profache
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