When determining the operating cycle, which of the following components reduce the length of the cycle?
A) increases in the inventory period
B) increases in the accounts receivable period
C) increases in the accounts payable period
D) increases in the fixed asset period

Question

Quizplus · Accepted Answer

Increases in the accounts payable period will reduce the operating cycle as it means the company is taking longer to pay off its creditors, which frees up cash for other operations. Increasing the inventory period or accounts receivable period will lengthen the operating cycle, and increasing the fixed asset period may not have a direct impact on the operating cycle.

When Determining the Operating Cycle, Which of the Following Components