Which of the following will tend to increase the credit period?
I.Increase in the buyer's inventory period
II.Decrease in the buyer's inventory period
III.Increase in the buyer's operating cycle
IV.Decrease in the buyer's operating cycle

Question

Quizplus · Accepted Answer

If the buyer's inventory period increases, they will need a longer credit period to pay their suppliers. Similarly, if the buyer's operating cycle (which includes inventory period) increases, they will need a longer credit period. Therefore, options I and III only will tend to increase the credit period. On the other hand, if either the buyer's inventory period or operating cycle decreases, they will require a shorter credit period, which eliminates options II and IV. Option E is incorrect because it only includes a decrease in the inventory period, which is the opposite of what is expected to increase the credit period.

Which of the Following Will Tend to Increase the Credit