Which of the Following Will Increase the Operating Cycle

question 43

Multiple Choice

Which of the following will increase the operating cycle?

• A) The cash cycle decreases by 1 day but the average payment period increases by 2.5 days.
• B) The days' sales in inventory decreases by 1 days but the average collection period increases by 2 days.
• C) COGS stays the same but inventory increases.
• D) All of these will increase the operating cycle.

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Definitions:

Overall Cost

A comprehensive term that refers to the total expenditure associated with acquiring, operating, and maintaining an asset or service over its entire lifespan.

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, often used as an indicator of inflation.

Cost of Living

The amount of money needed to sustain a certain level of living, including basic expenses such as housing, food, taxes, and healthcare.

Real Value

The value of an object or service adjusted for inflation, representing its purchasing power.