A Firm Has an Average Age of Inventory of 90

question 208

Multiple Choice

A firm has an average age of inventory of 90 days, an average collection period of 40 days, and an average payment period of 30 days. The firm's operating cycle is ____________days.

• A) 130
• B) 110
• C) 70
• D) 120

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Definitions:

Intragroup Transfer

Transactions between companies that are part of the same corporate group, such as the sale of goods or services, transfer of assets, or sharing of resources.

Inventories

Quantifiable goods or materials held by a company for the purpose of sale in the ordinary course of business, production, or use in creating goods and services.

Depreciable Asset

An asset that decreases in value over time due to use, wear and tear, or obsolescence and can be written off against income.

Useful Life

The estimated period over which an asset is expected to be usable by an entity, or the number of production or similar units expected to be obtained from the asset by an entity.