The ability to purchase production inputs on credit allows a firm to partially offset the length of time resources are tied up in the operating cycle.

Question

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By purchasing production inputs on credit, a firm can delay the outflow of cash, which helps to reduce the amount of time that resources are tied up in the operating cycle. This can ultimately improve the firm's cash flow and liquidity, enabling it to operate more efficiently and effectively over time.

The Ability to Purchase Production Inputs on Credit Allows a Firm