Question

In: Finance

Determine whether the following will INCREASE, DECREASE, or have NO EFFECT on the operating cycle 1....

Determine whether the following will INCREASE, DECREASE, or have NO EFFECT on the operating cycle

1. Accounts payable goes up

2. Accounts receivable goes down

3. Customers take longer to pay for the goods

4.Payments to suppliers are accelerated

5. Inventory takes longer to get sold

6. Accounts Receivables Turnover ratio increases from 5 times to 7 times

7. Accounts Payable Turnover ratio increases from 5 times to 7 times

8. Inventory Turnover ratio increases from 5 times to 7 times

Determine whether the following will INCREASE, DECREASE, or have NO EFFECT on the cash cycle:

Accounts payable goes up
Accounts receivable goes down
Customers take longer to pay for the goods
Payments to suppliers are accelerated
Inventory takes longer to get sold
Accounts Receivables Turnover ratio increases from 5 times to 7 times
Accounts Payable Turnover ratio increases from 5 times to 7 times
Inventory Turnover ratio increases from 5 times to 7 times

Expert Solution

ANSWER

Increment in current asset decreases the cash flow and vice versa.

Increment in current liabilities increases the cash flow and vice versa.

Events Effect on Operating cycle

Accounts payable goes up Increase
Accounts receivable goes down Increase
Customers take longer to pay for the goods Decrease
Payments to suppliers are accelerated Decrease
Inventory takes longer to get sold Decrease
Accounts Receivables Turnover ratio increases from 5 times to 7 times Increase
Accounts Payable Turnover ratio increases from 5 times to 7 times Decrease
Inventory Turnover ratio increases from 5 times to 7 times Increase

Events Effect on cash cycle

Accounts payable goes up Increase
Accounts receivable goes down Increase
Customers take longer to pay for the goods Decrease
Payments to suppliers are accelerated Decrease
Inventory takes longer to get sold Decrease
Accounts Receivables Turnover ratio increases from 5 times to 7 times Increase
Accounts Payable Turnover ratio increases from 5 times to 7 times Decrease
Inventory Turnover ratio increases from 5 times to 7 times Increase

jeff jeffy answered 1 year ago

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