Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881



Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem

What is the operating cycle?

To determine


Operating cycle is the elapsed time between the purchase of goods for resale and the collection of cash from customers preferably a larger amount of cash than was invested in the goods sold.


Consider the operating cycle for H.H Gregg, a large appliance retailer that provides long-term financing for customers. Appliances remain in inventory for an average of 3 months before being sold. Most are sold on credit and it takes an average of 12 months to collect the full amount of a sale. Thus, Gregg’s operating cycle is of 15 months representing the average purchase to collection interval i.e. ( 3 months to sell plus 12 months to collect)...

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