If the Average Accounts Receivable That a Firm Holds Decreases

question 91

Multiple Choice

If the average accounts receivable that a firm holds decreases without any decrease in credit sales,the operating cycle will:

• A)decrease because days sales outstanding decreases.
• B)have an unknown effect.
• C)stay the same because of no sales change.
• D)stay the same because accounts receivable are not in the operating cycle.
• E)stay the same because cash collections are sooner and it will affect the cash cycle only.

---

Definitions:

Operating Activity

Business functions related to producing goods or services, which are reflected in the company's cash flow from operations.

Investing Activity

Investing activity refers to the purchase or sale of long-term assets and investments, reflecting a company’s spending on acquiring and disposing of long-term assets.

Financing Activity

Transactions involving the flow of cash between a company and its owners, investors, or creditors, excluding operational and investing activities.

Statement of Cash Flows

A ledger statement which outlines how modifications in balance sheet accounts and revenue streams influence cash and cash equivalents, with the analysis broken down by operating, investing, and financing operations.