Jordan and Sons has an inventory period of 33 days,an accounts payable period of 41 days and an accounts receivable period of 27 days. Management is considering offering a 5% discount if its credit customers pay for their purchases within 10 days. If the new discount is offered the accounts receivable period is expected to decline by 13 days. If the new discount is offered,the operating cycle will decrease from _____ days to _____ days.

Question

Quizplus · Accepted Answer

The operating cycle is the sum of the inventory period, the accounts payable period, and the accounts receivable period. If the new discount is offered, the accounts receivable period is expected to decline by 13 days. Therefore, the operating cycle will decrease from 33 + 41 + 27 = 101 days to 33 + 41 + (27 - 13) = 88 days.

Jordan and Sons Has an Inventory Period of 33 Days,an