Assume a Firm's Production Process Requires an Average of 80

question 37

Multiple Choice

Assume a firm's production process requires an average of 80 days to go from raw materials to finished products and another 40 days before the finished goods are sold.If the accounts receivable cycle is 70 days and the accounts payable cycle is 80 days, what would the short-term operating cycle be?

• A)110 days
• B)130 days
• C)190 days
• D)270 days

---

Definitions:

Hedge Accounting

An accounting method that records the offsetting positions of a financial hedge and its underlying asset together to reduce volatility in financial statements.

Speculative Investments

Investments with a high risk of loss but also the potential for significant rewards, often characterized by high volatility.

GAAP Accounting

A set of accounting standards and principles designed to ensure consistency, fairness, and accuracy in financial reporting.

Derivatives

Financial instruments whose value is derived from the value of an underlying asset, index, or security.