Which one of the following statements is correct concerning the cash cycle?
A)The longer the cash cycle, the more likely a ﬁrm will need external ﬁnancing.
B)Increasing the trade payabless period increases the cash cycle.
C)A positive cash cycle is preferable to a negative cash cycle.
D)The cash cycle can exceed the operating cycle if the payables period is equal to zero.
E)Adopting a more liberal trade receivables policy will tend to decrease the cash cycle.

Question

Quizplus · Accepted Answer

The cash cycle measures the time between when a company pays for its inventory and when it receives cash from selling that inventory. A longer cash cycle means the company's cash is tied up for a longer period, increasing the likelihood of needing external financing to cover short-term obligations.

Which One of the Following Statements Is Correct Concerning the Cash