Asked by Journey La'Tore on Jun 03, 2024
Verified
Which one of the following statements concerning the cash cycle is correct?
A) The cash cycle is equal to the operating cycle minus the inventory period.
B) A negative cash cycle is actually preferable to a positive cash cycle.
C) Granting credit to slower paying customers tends to decrease the cash cycle.
D) The cash cycle plus the accounts receivable period is equal to the operating cycle.
E) The most desirable cash cycle is the one that equals zero days.
Cash Cycle
A business concept that describes the process of converting resources into cash flows, from purchasing inventory to collecting revenue from customers.
Inventory Period
The average time it takes for a company to turn its inventory into sales, indicating the efficiency of inventory management.
- Grasp the components and significance of the cash cycle and operating cycle in financial management.
Verified Answer
JH
Jodie HoilesJun 06, 2024
Final Answer :
B
Explanation :
A negative cash cycle indicates that a company receives payments from its customers before it needs to pay its suppliers, which is beneficial for its cash flow.
Learning Objectives
- Grasp the components and significance of the cash cycle and operating cycle in financial management.