If the Average Trade Receivables That a Firm Holds Decreases

question 71

Multiple Choice

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

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

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Definitions:

Payment Collections

The process of gathering payments or receivables from clients or customers.

Dun & Bradstreet Report

A report generated by Dun & Bradstreet that provides detailed financial and operational information on businesses, used for credit analysis.

Financial Statements

Formal records of the financial activities and condition of a business, person, or other entity, usually comprising the balance sheet, income statement, and cash flow statement.

Credit Report

A detailed report of an individual's credit history prepared by a credit bureau and used by lenders to determine a loan applicant's creditworthiness.