A Firm's Operating Cycle Can Be Determined By

question 44

Multiple Choice

A firm's operating cycle can be determined by:

• A)Adding the inventory turnover ratio to the receivables turnover ratio divided into 365 days.
• B)Adding the average days in inventory to the average days in receivables.
• C)Dividing cost-of-goods-sold by average inventory.
• D)Dividing 365 days by the difference in the inventory turnover and the receivable turnover.

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Definitions:

Levered Investment

Levered Investment involves using borrowed funds in addition to one's own investment capital to enhance the potential return of an investment.

Long Stock Position

The ownership of shares in a company with the expectation that they will increase in value over time.

Russell 2000

An index measuring the performance of approximately 2000 small-cap companies in the United States.

Large-cap Indexes

Large-cap Indexes track the performance of stocks from companies with large market capitalization, reflecting the overall health and trends of major corporations.