A Firm Has an Operating Cycle of 170 Days, an Average

question 138

Multiple Choice

A firm has an operating cycle of 170 days, an average payment period of 50 days, and an average age of inventory of 145 days. The firm's average collection period is ________ days.

• A) 25
• B) 75
• C) 95
• D) 120

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Definitions:

Fixed Assets

Fixed Assets are long-term tangible assets, such as buildings, machinery, and equipment, used in the operations of a business and not expected to be converted to cash within a year.

Current Assets

Assets that are expected to be converted into cash, sold or consumed within one year or within the operating cycle of a business, whichever is longer.

Intangible Assets

Non-physical assets that have value, such as patents, trademarks, and copyrights, known for their long-term benefits to a company.

Gain on Sale

The profit recognized when an asset is sold for more than its carrying amount.