Chapter 16, Problem 7CTCR

Summary Introduction

To discuss: The impact of BS Airline’s announcement on suppliers

Introduction:

Cash cycle:

The time between the cash disbursement and cash collection is termed as cash cycle.

The formula to calculate the cash cycle:

$\text{Cash cycle}=\text{Operating cycle}-\text{Accounts payable period}$

Operating cycle:

The phase, which takes time to complete the process from initial outlay of cash to produce, sell, and receive money from customers is termed as operating cycle.

The formula to calculate operating cycle:

$\text{Operating cycle}=\text{Inventory period}+\text{Accounts receivable period}$