Asked by Jocelyn Raygoza on Jul 27, 2024
Verified
An accounts receivable period increase would increase the length of a firm's cash cycle? Consider each in isolation.
Accounts Receivable Period
The average number of days that it takes for a company to collect payment from its customers after a sale has been made.
Cash Cycle
The duration of time it takes a company to convert its investments in inventory back into cash, taking into account the time needed to sell inventory, collect receivables, and pay bills.
- Understand the relationship between credit policies and their impact on cash movements and the cash cycle timeline.
Verified Answer
KM
Kristian MaustJul 31, 2024
Final Answer :
True
Explanation :
An increase in the accounts receivable period means it takes longer for a company to collect cash from credit sales, thereby lengthening the cash cycle.
Learning Objectives
- Understand the relationship between credit policies and their impact on cash movements and the cash cycle timeline.
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