A firm desires to increase its ratio of cash flow from operations divided by average current liabilities from its anticipated level of 30 percent for the coming year to a more desirable level of 40 percent.Which of the following actions is consistent with this increase?
A)increase short-term bank borrowing
B)decrease the number of days that accounts receivable are outstanding
C)decrease the number of days accounts payable are outstanding
D)increase the number of days inventories are held
E)none of the above

Question

Quizplus · Accepted Answer

Decreasing the number of days that accounts receivable are outstanding increases the speed at which cash is collected from customers, thereby increasing cash flow from operations. This action directly contributes to improving the ratio of cash flow from operations divided by average current liabilities.

A Firm Desires to Increase Its Ratio of Cash Flow