All Else Held Constant, Which of These Statements Is Correct

question 91

Multiple Choice

All else held constant, which of these statements is correct concerning the accounts payable period?

• A)The accounts payable period is equal to 360/(Sales/Average accounts payable).
• B)A decrease in the accounts payable period will increase the operating cycle.
• C)An increase in the accounts payable period will decrease the cash cycle.
• D)A decrease in the accounts payable period will decrease the operating cycle.
• E)An increase in the accounts payable turnover rate decreases the cash cycle.

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Definitions:

Liability

The state of being responsible for something, especially in terms of a legal or financial obligation.

Right of Recourse

The legal right to demand compensation or payment from a third party after fulfilling an obligation, especially in financial transactions.

Discharge

(1) The termination of an obligation, such as occurs when the parties to a contract have fully performed their contractual obligations. (2) The termination of a bankruptcy debtor’s obligation to pay debts.

Negotiable Instrument

A written document guaranteeing the payment of a specific amount of money, either on demand or at a set time, to the person possessing it.