A Firm Has an Average Age of Inventory of 60

question 193

Multiple Choice

A firm has an average age of inventory of 60 days, an average collection period of 45 days, and an average payment period of 30 days. The firm's operating cycle is _________days.

• A) 135
• B) 75
• C) 90
• D) 105

---

Definitions:

Book Value Per Share

A financial measure that indicates the value of a company's equity as represented in its shares, calculated by dividing total shareholders' equity by the number of outstanding shares.

Market Price

The current price at which an asset or service can be bought or sold.

Common Share

A type of equity ownership in a corporation, representing a fraction of the total ownership, where each share entitles the holder to a vote at company meetings and a share in the company’s profits.

Acid-Test Ratio

A liquidity ratio measuring a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.