If a firm's inventory ratio increases, what will happen to the firm's operating cycle?
A) It will increase.
B) It will decrease.
C) It will increase and then slowly decrease back to the initial level.
D) It will decrease and then slowly increase back to the initial level.

Question

Quizplus · Accepted Answer

An increase in the inventory ratio indicates that a firm is taking longer to sell its inventory. This lengthens the operating cycle, as the operating cycle includes the time to sell inventory and collect receivables.

If a Firm's Inventory Ratio Increases, What Will Happen to the Firm's