The Length of Time Between the Payment for Inventory and the Collection

question 315

Multiple Choice

The length of time between the payment for inventory and the collection of cash from receivables is called the _________________.

• A) Operating cycle.
• B) Inventory period.
• C) Accounts receivable period.
• D) Accounts payable period.
• E) Cash cycle.

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Definitions:

Accounts Receivable

This refers to the money owed to a company by its customers for goods or services delivered or used but not yet paid for.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is a contra-asset account that estimates the amount of receivables that may not be collectible.

Future Transaction Value

The predicted or estimated financial value of a transaction that will occur at a later date, often used in forecasting and budgeting.

Current Market Value

The present value at which an asset can be bought or sold in a current transaction between willing parties.