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Sagot :
The normal operating cycle for a merchandising company is likely to be longer than for a service company because inventory must first be purchased and sold, and then the receivables must be collected.
In the field of business, a merchandising company can be described as a company that buys finished goods or inventory and then focuses on reselling the inventory for finished goods. On the other hand, a service company will offer its own services.
A merchandising company will first purchase the inventory or finished goods, then sell them and collect the revenue generated from these sales. Hence, due to these procedures, the operating cycle of the merchandising companies is longer.
As service companies do not engage in reselling and then collecting receivables, hence their operating cycles are smaller.
To learn more about operating cycle, click here:
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