Galaxy’s operating cycle is slightly shorter than the industry average. This suggests that:

Question

BlackTom AI · Accepted Answer

The question states: Galaxy’s operating cycle is slightly shorter than the industry average. This suggests that:

Option A: 'Galaxy takes longer to convert inventory into cash than its competitors' This would imply a longer operating cycle, not shorter, so this statement contradicts the given information. It is not consistent with a shorter cycle.

Option B: 'Galaxy has faster inventory turnover and/or collects receivables more quickly than peers' This aligns with a shorter operating cycle, since a quicker turnover of inventory and faster collection of receivables reduce the time from purchasing inventory to collecting cash, thereby shortening the cycle. This is a correct interpretation of the impact on the operating cycle.

Option C: 'Galaxy has a longer cash conversion cycle' The cash conversion cycle is related but distinct; a shorter operating cycle does not automatically indicate a longer CCC, and the statement suggests the opposite trend. This option misattributes the measure.

Option D: 'Galaxy’s net profit margin is below industry average' The operating cycle length tells us about operating efficiency and working capital timing, not directly about profitability. A shorter cycle does not necessarily imply a lower net profit margin, so this is not a direct conclusion from the cycle length.

Overall, option B provides the correct causal interpretation of a shorter operating cycle, while the other options describe outcomes that would not be implied by a shorter cycle.

ACCT10001_2025_SM1 Mock Exam (Quiz practice) - Requires Respondus LockDown Browser

Galaxy’s operating cycle is slightly shorter than the industry average. This suggests that:

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