Which One of the Following Statements Concerning the Cash Cycle

question 42

Multiple Choice

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.

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Definitions:

Net Income

Net income is the total profit of a company after all expenses, including taxes and costs, have been subtracted from total revenue.

Payday Lender

A financial institution that offers high-interest, short-term loans, usually due on the borrower's next payday.

Proxy Statement

A document containing the information that a company is required by law to provide to shareholders to solicit proxies for voting at a shareholder meeting.

Affirmative Covenants

Provisions in a loan agreement requiring the borrower to undertake certain actions or meet specific conditions.