Question

Operating cycle can be delayed by ________________.

• A. Increase in WIP period
• B. Decrease in raw materials storage period
• C. Decrease in credit payment period
• D. Both (A) and (C) above
• E. Both (B) and (C) above

Answer 1

The correct option is D Both (A) and (C) above

Operating cycle period = Raw material storage period + Conversion period + Finished goods storage period + average collection period - average payment period.
An increase in WIP (or conversion) period will increase the operating cycle period and this will lead to a delay in the operating cycle.

Hence option (D) is the correct answer.