Question

Which of the following activities is not a component of the operating cycle?A)Sale of merchandiseB)Payment of employees' salariesC)Collection of cash from merchandise salesD)Purchase of merchandise

Answer 1

Answer:

B)Payment of employees' salaries

Explanation:

Operating cycle: The operating cycle is that cycle in which the firm makes the collection of cash with respect to the sales and make the payment with respect to the purchase of the inventory

The cycle start from days of inventory outstanding, days of sales outstanding, and days of payable outstanding

In mathematically,  

Operating cycle = days of inventory outstanding + days of sales outstanding - days of payable outstanding

Thus, option B is correct.