Assume All Sales and Purchases Are on Credit

question 7

Multiple Choice

Assume all sales and purchases are on credit.Which one of the following statements is correct concerning the cash cycle?

• A)The cash cycle starts when inventory is purchased.
• B)The longer the cash cycle,the more likely a firm will need external financing.
• C)Increasing the accounts payable period increases the cash cycle.
• D)The cash cycle can exceed the operating cycle if the payables period is equal to zero.
• E)Adopting a more liberal accounts receivable policy will tend to decrease the cash cycle.

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