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Which Do You Feel Is the More Appropriate Upper Limit

question 89

Essay

Which do you feel is the more appropriate upper limit for the credit period that a seller offers to a buyer:
the buyer's operating cycle or the buyer's inventory period?

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Definitions:

Accrual-Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash is received or paid.

Liquidity-Basis

A measurement or approach focusing on how quickly assets can be converted into cash without affecting their value.

Transactions Recorded

The process of documenting financial or commercial activities to maintain an accurate account of business operations.

Accounting Equation

A fundamental principle in finance representing the relationship: Assets = Liabilities + Equity.

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