CFA Practice Question

There are 120 practice questions for this study session.

CFA Practice Question

An analyst gathers the following information for a company:

Inventory turnover: 20.7
Accounts payable turnover: 14.1
Accounts receivable turnover: 12.5

The company's operating cycle is closest to ______.
A. 46.8 days
B. 40.7 days
C. 25.6 days
Explanation: Operating cycle = days inventory outstanding + days receivables outstanding

Days inventory outstanding = 365 / inventory turnover = 17.63 days
Days receivables outstanding = 365 / accounts receivable turnover = 29.2 days
Operating cycle = 17.63 days + 29.2 days = 46.8 days

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