Hey guys, I can’t seem to find what the difference is between the two. I had a question asking if days in payables increased, what would happen. I choose decrease in operating cycle but the answer was decrease in net operating cycle.
Thxn!
Operating cycle = Days of inventory on hand + Days of sales outstanding
Net operating cycle = Days of inventory on hand + Days of sales outstanding - Number of days payables
Net operating cycle is also called cash conversion cycle.
If anyone is having a hard time remembering the formula for the CCC (i did) I used the acronym RIP to remember it lol. Receivables + Inventory - Payables.
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