The Length of Time Between the Purchase of Inventory and the Receipt

question 91

Multiple Choice

The length of time between the purchase of inventory and the receipt of cash from the sale of that inventory 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 Payable

Liabilities or amounts owed by a business to its creditors for goods and services that have been received but not yet paid for.

Accounts Receivable

Financial obligations of customers to a firm for items or services rendered but not yet compensated.

Face Value

Refers to the nominal or dollar value printed on a financial instrument, such as a bond or stock certificate, representing its legal value.

Bond

An interest-bearing security that obligates the issuer to pay the bondholder a specified sum of money, generally at fixed intervals, and to repay the principal at maturity.