Correct option is D
The operating cycle refers to the time duration between the acquisition of raw materials and the collection of cash from receivables after selling finished goods. To shorten the operating cycle, a company must focus on reducing the time it takes in each stage of this cycle:
B. Enhanced coordination of firm activities helps in synchronising procurement, production, and sales processes, thereby reducing delays and lead times.
C. Manufacturing automation speeds up the production process, reducing manufacturing time and increasing efficiency. This directly shortens the operating cycle.
E. Tightening credit policy means reducing the credit period given to customers, which helps in faster collection of receivables, thus reducing the operating cycle.
Information Booster:
The operating cycle comprises inventory period (time raw materials remain in stock and are processed) and receivables period (time taken to collect payments).
Strategies to shorten the cycle include faster production (automation), better coordination across departments, and faster cash collection (credit policy).
Efficient inventory management and supply chain integration reduce idle times.
Tightening credit improves cash flow but needs to be balanced to avoid losing customers.
Automation reduces manual errors and speeds up manufacturing.
Enhanced coordination reduces delays due to miscommunication and ensures smooth flow of materials and information.
Additional Knowledge:
A. Reducing operating expenses: While beneficial for cost control, it does not necessarily shorten the operating cycle.
D. Longer production schedule: Extends production time, thus lengthening the operating cycle, which is undesirable for shortening it.
English
10 Questions
20 Marks
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