Generally,the Longer the Normal Inventory Holding Period of a Customer

question 13

True/False

Generally,the longer the normal inventory holding period of a customer the longer the credit period.One effect of extending the credit period to match the customer's merchandise holding period is to increase the customer's payables deferral period,which actually serves to shorten the customer's cash conversion cycle.

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not influence ongoing investment decisions.

Opportunity Costs

The cost of opting for one alternative over another, typically representing the benefits one misses out on when choosing a particular option.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production supplies.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision.