Essentials of Corporate Finance
Essentials of Corporate Finance
8th Edition
ISBN: 9780078034756
Author: Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 16, Problem 16.2C
Summary Introduction

To discuss: The effect of an increase in average receivables will have on the operating cycle.

Introduction:

Operating cycle is the length of time taken between the purchase of inventory to sales and on collecting accounts receivable. This indicates how well the company uses the cash to sustain its growth.

The formula to calculate operating cycle:

Operating cycle=Inventory period+Accounts receivable period

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