If the Average Accounts Receivable That a Firm Holds Decreases

question 80

Multiple Choice

If the average accounts receivable 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) decrease because days' sales outstanding decreases.
• D) stay the same because accounts receivable are not in the operating cycle.
• E) have an unknown effect.

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Definitions:

Accounting Information System

A structure that collects, stores, manages, processes, retrieves, and reports financial data for its users, facilitating informed business decisions.

Financial Accounting

The process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time, in order to produce financial statements.

LIFO

Last In, First Out, an inventory valuation method where the most recently produced items are recorded as sold first.