The Jennings Company recently hired a new chief financial officer. One of the first changes she made was to delay the payment of all bills by ten days. The net effect of this action is to decrease the:

Question

Quizplus · Accepted Answer

Delaying the payment of bills by ten days increases the accounts payable period, which is a component of the cash cycle. The cash cycle is the amount of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. By delaying payments, the company is effectively extending the time it holds onto its cash, thus decreasing the cash cycle.

The Jennings Company Recently Hired a New Chief Financial Officer