The operating cycle can be decreased by:
A)paying accounts payable faster.
B)discontinuing the discount given for early payment of an accounts receivable.
C)decreasing the inventory turnover rate.
D)collecting accounts receivable faster.
E)increasing the accounts payable turnover rate.

Question

Quizplus · Accepted Answer

Collecting accounts receivable faster will decrease the time it takes to turn accounts receivable into cash, thereby shortening the operating cycle. Options A, B, and E will all increase the operating cycle by either increasing expenses or decreasing revenue. Option C is also incorrect as decreasing inventory turnover rate will increase the time it takes to sell inventory, thereby increasing the operating cycle.

The Operating Cycle Can Be Decreased By