Mycale's has always paid its suppliers in 30 days. The company just hired a new financial officer who is changing the policy such that suppliers will now be paid in 45 days. This change will ______ the accounts payable period and _______ the cash cycle.

Question

Quizplus · Accepted Answer

Increasing the accounts payable period from 30 to 45 days allows the company to hold onto its cash longer, thus increasing the time it takes to pay suppliers. This action directly increases the accounts payable period. By delaying payments to suppliers, the company reduces the cash cycle, as it retains cash in its operations for a longer period before needing to pay out for its liabilities, effectively decreasing the cash cycle.

Mycale's Has Always Paid Its Suppliers in 30 Days