Which of the Following Will Increase the Operating Cycle

question 83

Multiple Choice

Which of the following will increase the operating cycle?

• A)The cash cycle decreases by one day but the average payment period increases by two and a half days.
• B)The days' sales in inventory decreases by one day but the average collection period increases by two days.
• C)COGS stays the same but inventory increases.
• D)All of the options will increase the operating cycle.

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Definitions:

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, giving more weight to some values.

Ordinary Shares

Equity securities representing ownership in a company, giving the shareholder voting rights and a share in the company's profits through dividends.

Dilutive Potential

The possibility that the issuance of additional securities could decrease earnings per share or decrease an ownership interest.

After-tax Effect

The impact of taxes on a company's financial transactions, typically focusing on the net result after accounting for the taxation impact.