An Operating Cycle Is the Average Time That It Takes

question 68

True/False

An operating cycle is the average time that it takes to go from cash to cash in producing revenues.

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Definitions:

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects on its credit sales by comparing net credit sales with the average accounts receivable over a period.

Return On Total Assets

A financial ratio that measures a company's net income relative to its total assets, indicating how efficiently management is using its assets to generate profit.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to fund day-to-day operations.

Current Ratio

A financial metric assessing a firm's capability to settle its current obligations using its current assets.