The correct answer is: A. R + W + F + D – C
The operating cycle is the length of time it takes a company to convert its raw materials into finished goods, sell those goods, and collect the cash from the sale. It is calculated as follows:
Operating cycle = Raw material storage period + Work in progress holding period + Finished goods storage period + Receivables (debtors) collection period – Credit period allowed by suppliers (creditors)
Option A is the only option that includes all of these terms. Option B does not include the credit period allowed by suppliers, which is a necessary component of the operating cycle. Option C does not include the finished goods storage period, which is also a necessary component of the operating cycle. Option D does
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