A Firm Has Arranged for a Lockbox System to Reduce

question 169

Multiple Choice

A firm has arranged for a lockbox system to reduce collection time of accounts receivable. Currently the firm has an average collection period of 43 days, an average age of inventory of 50 days, and an average payment period of 10 days. The lockbox system will reduce the average collection period by 3 days by reducing processing, mail, and clearing float. The firm's cash conversion cycle

• A) increases by 3 days.
• B) decreases by 3 days.
• C) will not change.
• D) is 93 days.

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Definitions:

Volume Overload

A clinical condition where there is an excessive accumulation of fluid in the body, leading to swelling and increased blood volume.

Semilunar Valves

Valves located between the ventricles of the heart and the large arteries leaving the heart (the pulmonary artery and aorta) that prevent backflow of blood into the ventricles.

Diastole

The period during a heartbeat when the heart muscle is in a state of relaxation, permitting the chambers to be replenished with blood.

Carotid Artery Pulse

A pulse that can be felt on either side of the neck over the carotid arteries, used to assess heart rate and rhythm.