If a Firm Decided to Reduce the Receivables Period by Speeding

question 60

Multiple Choice

If a firm decided to reduce the receivables period by speeding up its collections from its customers while keeping the inventory period and payables period the same, then the:

• A) cash conversion cycle will increase.
• B) cash conversion cycle will decrease.
• C) firm's investment in working capital will be minimized.
• D)cash conversion cycle will increase while net working capital decreases.

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Definitions:

GAAP

Generally Accepted Accounting Principles; these are the standard set of accounting rules, standards, and procedures that companies use to compile their financial statements in the United States.

IFRS

International Financial Reporting Standards, a set of accounting guidelines that govern how financial statements should be reported around the world.

Auditing

The examination of financial statements by a certified public accountant in order to express an opinion as to the fairness of presentation.

CPA

Certified Public Accountant, a professional designation given to accounting professionals in numerous countries around the world after completing a study course and passing an examination.