Generally,the longer the normal inventory holding period of a customer the longer the credit period.One effect of extending the credit period to match the customer's merchandise holding period is to increase the customer's payables deferral period,which actually serves to shorten the customer's cash conversion cycle.

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Extending the credit period to match the customer's merchandise holding period increases the customer's payables deferral period and shortens the customer's cash conversion cycle.

Generally,the Longer the Normal Inventory Holding Period of a Customer