Which one of the following will not affect the operating cycle?
A) Decreasing the payables turnover from 7 times to 6 times.
B) Increasing the days sales in receivables.
C) Decreasing the inventory turnover rate.
D) Increasing the average receivables balance.
E) Decreasing the credit repayment times for the ﬁrm's customers.

Question

Quizplus · Accepted Answer

Operating cycle is the time it takes to convert inventory into cash. Therefore, decreasing the payables turnover does not directly impact the cycle. The other options all impact the cycle by either increasing the time it takes to collect cash (B and D) or decreasing the time it takes to turn inventory into cash (C) or reducing the time it takes for customers to repay credit (E).

Which One of the Following Will Not Affect the Operating