Other factors remaining constant, an increase in the average collection period will result in ________.
A) an increase in the operating cycle
B) an increase in the average payment period
C) a decrease in the operating cycle
D) a decrease in the average payment period

Question

Quizplus · Accepted Answer

An increase in the average collection period means that it takes longer for the company to collect payment from its customers. This will increase the operating cycle, which is the time it takes for a company to convert its inventory into cash. It will not impact the average payment period, which is the time it takes for the company to pay its vendors.

Other Factors Remaining Constant, an Increase in the Average Collection