An Increase in the Average Payment Period Will ________ the Operating

question 280

Multiple Choice

An increase in the average payment period will ________ the operating cycle and ________ the cash conversion cycle.

• A) increase; decrease
• B) decrease; decrease
• C) decrease; not affect
• D) not affect; decrease

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Definitions:

Interest

Payment for the use of another person’s money.

Bonds Payable

Bonds payable refers to long-term debt instruments issued by a company to investors, promising to pay back with interest at specified maturity dates.

Operating Activities

Cash flow activities that include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income.

Issuance of Debt

The process by which a company borrows money through the sale of bonds or taking out loans, creating a liability that must be repaid in the future.