If You Delay Paying Your Suppliers by an Additional Ten

question 244

Multiple Choice

If you delay paying your suppliers by an additional ten days, then:

• A) Your payables turnover rate will increase.
• B) You will require less bank financing of your operations.
• C) The cash cycle will increase by ten days.
• D) Your operating cycle will lengthen by ten days.
• E) Your stock-out costs will rise.

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Definitions:

Unrealized Intercompany Profits

Profits resulting from transactions between companies within the same group that have not yet been realized outside of the group.

Equity Method

A method of accounting for an investment where the investor recognizes income based on its share of the investee's profits or losses, adjusting the carrying amount of the investment.

Unamortized Purchase Discrepancy

The portion of the purchase price that has not yet been allocated or amortized over the assets acquired in a transaction.

Equity Method

An accounting principle used for incorporating the investor's share of associates' profits or losses, contributing to the investor's book value of the investment.