Operating cycle definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Operating cycle can be defined as: Normal time between paying cash for merchandise or employee services and receiving cash from customers. Operating cycle is the average or normal time from the purchase of inventory to the conversion of that inventory to cash, operating cycle starting with the purchase of inventory and ending with receipt of cash from the sale of inventory. This means that operating cycle could include a sale on account that is then then converted to cash.
