Which one of the following statements is correct concerning the cash cycle?
A) The longer the cash cycle, the more likely a company will need external financing.
B) Increasing the accounts payable period increases the cash cycle.
C) Accepting a supplier's discount for early payment decreases the cash cycle.
D) The cash cycle can exceed the operating cycle if the payables period is equal to zero.
E) Offering early payment discounts to customers will tend to increase 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