The operating cycle begins with spending cash and it ends with receiving cash from customers.
The following steps are:
1. Purchasing activity: buying product usually at a wholesale price and selling at retail price.
2. Receiving product and taking in inventory to put in the market.
3. Sales Activity: selling products to customers that are seeking products.
4. Recording the sale of the product and collecting cash.
The step are than repeated for the operating cycle of a merchandising business.
The operating cycling for retailers are usually shorter than manufactures because retailers product are ready to sale to customer.
Retailers have to better management of inventory so that they don't run out product. Making customers leave their business and go to another that sell the same thing. They don't want to hold a bunch of inventory, because it takes up space, which cost money, and restricting cash flow because product are being held on shelf; not producing income.
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