Question

    According to the Working Capital Management concept,

    the operating cycle is calculated using which of the following formulas?
    A Gross Operating Cycle = Inventory Holding Period + Debtor Collection Period Correct Answer Incorrect Answer
    B Net Operating Cycle = Inventory Holding Period + Debtor Collection Period – Payables Payment Period Correct Answer Incorrect Answer
    C Gross Operating Cycle = Inventory Holding Period + Payables Payment Period Correct Answer Incorrect Answer
    D Net Operating Cycle = Inventory Holding Period + Payables Payment Period Correct Answer Incorrect Answer
    E Gross Operating Cycle = Debtor Collection Period – Payables Payment Period Correct Answer Incorrect Answer

    Solution

    The Net Operating Cycle (NOC) measures the time between outlaying cash for raw material and receiving cash from product sales. It includes the Inventory Holding Period , Debtor Collection Period , and subtracts the Payables Payment Period . This helps in understanding how efficiently a company is managing its working capital.

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