Gonzales determined that Company A had an operating cycle of 100 days in 20X2, whereas Company D had an operating cycle of 145 days for the same fiscal year. This means that:

Mary Gonzales is evaluating companies in the office supply industry and has compiled
the following information:
20X1 20X2
Company Credit Sales ($)
Average Receivables
Balance ($) Credit Sales ($)
Average Receivables
Balance ($)
A 5.0 million 1.0 million 6.0 million 1.2 million
B 3.0 million 1.2 million 4.0 million 1.5 million
C 2.5 million 0.8 million 3.0 million 1.0 million
D 0.5 million 0.1 million 0.6 million 0.2 million
Industry 25.0 million 5.0 million 28.0 million 5.4 million
A. Company D’s inventory turnover is less than that of Company A.
B. Company D’s inventory turnover is greater than that of Company A.
C. Company D’s cash conversion cycle is shorter than that of Company A.

Ans: B. Company D’s inventory turnover is greater than that of Company A.