How would the length of the Bespoken Spirits operating cycle compare to the length of the Jack Daniel Distillery operating cycle?

Whiskey is an alcoholic beverage that takes, on average, three to fifteen years to mature before it is ready for consumption. Typically, whiskey matures in oak barrels – that process helps to give each whiskey type its unique aroma, color, and taste. The Jack Daniel Distillery, for example, ages its Jack Daniel’s whiskeys in oak barrels over a period of four years or more.

A startup company, Bespoken Spirits, has developed a proprietary technology to rapidly produce custom whiskey. Not only can the whiskey be ready in a matter of days, but users can customize the aroma, color, and taste of each whiskey batch.

Normally, about 10% of the liquid in a whiskey cask evaporates – this evaporated portion is called the “angel’s share.” Bespoken Spirits has eliminated the angel’s share, losing almost no whiskey to evaporation.

Bespoken Spirits is based in Menlo Park, California, and has obtained a round of investor funding for expansion.

Discussion questions

1. Define “operating cycle.”
2. What would you estimate the operating cycle for the Jack Daniel Distillery to be?
3. What would you estimate the operating cycle for Bespoken Spirits to be?
4. Why does the length of the operating cycle matter from an accounting and financial reporting standpoint?