The Difference Between a Firm's Operating Cycle and Its Cash

question 11

Multiple Choice

The difference between a firm's operating cycle and its cash cycle is ________.

• A) its account receivable days
• B) its accounts payable days
• C) its inventory days
• D) There is no difference between the cash and operating cycles.

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Definitions:

Unsystematic Risk

The risk associated with a specific company or industry, which can be reduced through diversification, unlike systematic risk which affects the entire market.

Portfolio Diversification

A strategy for managing risk that involves diversifying a portfolio with a broad range of investments to reduce the effect of the performance of any individual asset.

Security

A financial instrument that represents ownership (stocks), a creditor relationship (bonds), or rights to ownership (options) that can be bought and sold.

Expected Return

The weighted average of the probable returns of an investment, considering all possible outcomes and their likelihoods.