Delaying the payment of accounts payable in order to improve cash management is known as
A) ruining the firm's credit rating.
B) float.
C) stretching the payables.
D) reducing optimal cash requirements.

Question

Quizplus · Accepted Answer

Stretching the payables is a common strategy used by businesses to improve cash flow. This involves delaying payment of accounts payable until closer to the due date or negotiating longer payment terms with suppliers. However, this strategy should be used carefully to avoid damaging relationships with suppliers or harming the company's credit rating. Option A is incorrect because delaying payment without communication can lead to a poor credit rating. Option B is incorrect because float refers to the time it takes for a check to clear, not delaying payment. Option D is incorrect because reducing optimal cash requirements does not accurately describe this strategy.

Delaying the Payment of Accounts Payable in Order to Improve