Finish this statement: Decreasing the cash cycle can increase profits A. by decreasing interest payments on...
Finish this statement: Decreasing the cash cycle can increase profits
A. by decreasing interest payments on debt.
B. by increasing interest payments on debt.
C. by decreasing the operating cycle.
D. by increasing the operating cycle.
E. by increasing the inventory period.
Homework Answers
Correct choice C( By decreasing the operating cycle)
Operating cycle is the number of days a firm takes to convert its operating assets into cash
Operating cycle = Days of sales outstanding + days of inventory - days of payables
The higher the operating cycle, the lesser the profits
Interest is not a component of cash cylce
By increasing the inventory period, the operating cycle will get increased and will result in lower profits
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