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:

Consolidated Statement of Cash Flows

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company, taking into account both its subsidiaries and parent company.

Average Exchange Rate

A calculation representing the mean value of a currency against another over a specified period.

Historical Rate

The exchange rate at which a foreign currency transaction was valued on the transaction date, used for converting transactions denominated in foreign currencies.

Functional Currency

The primary currency of the principal economic environment in which an entity operates, usually used in preparing financial statements.