Merryl Enterprises Currently Has an Operating Cycle of 59 Days

question 48

Multiple Choice

Merryl Enterprises currently has an operating cycle of 59 days.The firm is analyzing some operational changes,which are expected to increase the accounts receivable period by 2 days and decrease the inventory period by 5 days.The accounts payable turnover rate is expected to increase from 42 to 46 times per year.If all of these changes are adopted,what will the firm's new operating cycle be?

• A)51 days
• B)54 days
• C)56 days
• D)59 days
• E)65 days

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the firm's operating cycle if longer.

Current Liabilities

Short-term financial obligations due within one year, including accounts payable, short-term loans, and accrued expenses.

Cash Coverage Ratio

A liquidity ratio that measures a company’s ability to pay off its debt obligations with its cash and cash equivalents.

Tax Rate

The percentage of income or value of a transaction that is required to be paid as tax to a governmental authority.