Your key supplier has decided to change the terms of your credit arrangement from net 45 to net 30. This action will _____ your accounts payable period and _____ your cash cycle.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) decrease; not change

Question

Quizplus · Accepted Answer

Changing the terms from net 45 to net 30 decreases the accounts payable period, as you now have less time to pay your invoices. This, in turn, increases your cash cycle because you have to pay out cash sooner, reducing the time your cash is available for other uses.

Your Key Supplier Has Decided to Change the Terms of Your