Which Statement Is True

question 65

Multiple Choice

Which statement is true?

• A)A decrease in the accounts receivable turnover rate decreases the cash cycle.
• B)Paying a supplier within the discount period rather than waiting until the end of the normal credit period will decrease the cash cycle.
• C)The number of days in the cash cycle can be positive, negative, or equal to zero.
• D)An increase in the inventory turnover rate must increase the cash cycle.
• E)The payables period must be shorter than the receivables period.

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Definitions:

After-Tax Discount Rate

The interest rate used in discounting cash flows that takes into account the tax implications of the investment.

Incremental Sales

The additional revenue generated from a specific business decision or action.

Cash Operating Expenses

Expenses incurred during the normal operation of a business that affect its cash position, such as rent, utilities, and payroll, excluding non-cash expenses like depreciation.

Working Capital

The difference between a company's current assets and its current liabilities, indicating the liquidity and operational efficiency of the business.