Which one of these statements is correct? Assume all else held constant.
A) A decrease in the accounts receivable turnover rate decreases the cash cycle.
B) The cash cycle is equal to the operating cycle minus the inventory period.
C) A negative cash cycle is preferable to a positive cash cycle.
D) A decrease in the accounts payable period shortens the cash cycle.
E) The cash cycle plus the accounts receivable period is equal to the operating cycle.

Question

Quizplus · Accepted Answer

A negative cash cycle indicates that a company is able to convert its inventory and receivables into cash faster than it needs to pay its payables, which is generally preferable as it implies better liquidity management.

Which One of These Statements Is Correct? Assume All Else