From the course: Financial Accounting Part 2

Unlock the full course today

Join today to access over 23,200 courses taught by industry experts.

Nike, McDonald’s, and the operating cycle

Nike, McDonald’s, and the operating cycle

From the course: Financial Accounting Part 2

Start my 1-month free trial Buy for my team

Nike, McDonald’s, and the operating cycle

“

- Nike makes athletic shoes and other sportswear. Nike manufactures these items and then sells them to retail outlets, typically on credit. I know that you are an expert in these matters, so very roughly speaking, how many days elapse from the time that Nike buys raw materials until the time that Nike sells the finished shoes and sportswear to the retail outlets? - [Instructor] Well, it's about 90 days. We call that the number of days' sales in inventory. - [Host] Okay, so how long until Nike collects the cash from these sales to retail outlets? - [Instructor] Well, on average, that's about 35 days. We call that period the average collection period. If you take these two numbers together, 90 days from the purchase of the raw materials to the sale of the finished goods and 35 days from the sale to the cash collection, you get 125 days which is the length of Nike's Operating cycle. - [Host] Operating cycle? - [Instructor] Yeah,…

Contents