CFA Practice Question

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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:
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
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