True: if a company’s operating cycle is much longer than its average payment period for suppliers, it creates the need to borrow money to fund its inventories and accounts receivable.
The time it takes for a business to purchase items, sell them, and get paid for those sales is referred to as an operating cycle. It is, in other words, the time it takes for a business to convert its inventories into cash. Depending on the sector, an operational cycle can be any length. DIO is initially calculated by multiplying the average inventory balance by the COGS for the current period, then by 365. The process of buying raw materials, converting the stock into marketable goods, and selling them to clients takes the business, on average, 97 days.
The following components make up the operating cycle: the average collection period (365 days/accounts receivable), plus the days' sales in inventory (365 days/inventory turnover ratio).
Learn more about the operating cycle here: https://brainly.com/question/26482515
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