Which one of the following will decrease the operating cycle?
A) Paying accounts payable faster
B) Discontinuing the discount given for early payment of an accounts receivable
C) Decreasing the inventory turnover rate
D) Collecting accounts receivable faster
E) Increasing the accounts payable turnover rate

Question

Quizplus · Accepted Answer

Collecting accounts receivable faster will decrease the operating cycle by reducing the time it takes for a company to collect cash from its customers. This, in turn, will improve the cash conversion cycle, which is a measure of how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. The other choices would not necessarily decrease the operating cycle or could potentially increase it.

Which One of the Following Will Decrease the Operating Cycle