Practicing Success
There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below. |
Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A). Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A). Both Assertion (A) and Reason (R) are incorrect. Only Assertion (A) is correct. |
Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A). |
The operating cycle in accounting is the period (number of days) from the moment the raw materials arrive at the warehouse until the receipt of payment for the products sold. This is an important part of running a business. You buy some goods and then you sell them and then you collect on that sale. From the time you spend the money necessary to acquire inventory to the time you get the money back from customers is called the operating cycle. The ability of leaders to understand and manage the company's operating cycle is one of the most important predictors of long-term business viability. Few things will put companies out of business quicker than spending cash faster than you collect it. The operating cycle measures how well you manage your cash. Before you can produce a product or service, you need to have the right materials and the right resources (equipment, people, etc.). Acquiring these resources and materials costs money, so you've spent cash before you've produced or sold anything.
|