FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
19th Edition
ISBN: 9781119493624
Author: Kimmel
Publisher: WILEY
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Textbook Question
Chapter 2, Problem 1Q
What is meant by the term operating cycle?
Expert Solution & Answer
To determine
Current Assets: Current assets are those assets that can be converted to cash, or used in the business operations within a period of one year, or the normal operating cycle of the business, whichever is longer in time period.
To Define: The term operating cycle of the business.
Explanation of Solution
The operating cycle refers to a time period, within which a business firm completes the cycle of cash to cash status, in the business operations. That is, use of cash in the first place to purchase inventory, sell them to customers on credit and creating accounts receivable, and finally collecting the cash back to the business from the customers. But few other type of business like Vineyard, the operating cycle extends to more than a year. Therefore most companies follow one year as the operating cycle barring few exceptional cases and determines their assets and liabilities to be classified as current and long-term.
Conclusion
Thus, operating cycle is the time period in which the business firm sustain their cash status through business operations.
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Chapter 2 Solutions
FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
Ch. 2 - What is meant by the term operating cycle?Ch. 2 - Define current assets. What basis is used for...Ch. 2 - Prob. 3QCh. 2 - Prob. 4QCh. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - Prob. 8QCh. 2 - What do these classes of ratios measure? (a)...Ch. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Prob. 12QCh. 2 - (a) What is the primary objective of financial...Ch. 2 - Merle Hawkins, the president of Pathway Company,...Ch. 2 - Prob. 15QCh. 2 - Prob. 16QCh. 2 - Prob. 17QCh. 2 - Prob. 18QCh. 2 - What is the economic entity assumption? Give an...Ch. 2 - Prob. 20QCh. 2 - The following are the major balance sheet...Ch. 2 - Prob. 2.3BECh. 2 - Prob. 2.4BECh. 2 - Prob. 2.5BECh. 2 - Prob. 2.7BECh. 2 - Prob. 2.8BECh. 2 - Prob. 2.9BECh. 2 - Here are some qualitative characteristics of...Ch. 2 - Prob. 2.11BECh. 2 - Prob. 2.1bDIECh. 2 - Prob. 2.2DIECh. 2 - Prob. 2.1ECh. 2 - The major balance sheet classifications are listed...Ch. 2 - Nordstrom, Inc. operates department stores in...Ch. 2 - Prob. 2.13ECh. 2 - Prob. 2.8APCh. 2 - Prob. 2.1EYCTCh. 2 - Prob. 2.3EYCTCh. 2 - Prob. 2.8EYCTCh. 2 - ETHICS CASE At one time, Boeing closed a giant...Ch. 2 - In what ways does the format of a statement of...Ch. 2 - Prob. 2.2IECh. 2 - Prob. 2.3IECh. 2 - Prob. 2.5IE
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