Which of the following will increase the operating cycle?
I.increasing the inventory turnover rate
II.increasing the payables period
III.decreasing the receivable turnover rate
IV.decreasing the inventory level
A)I only
B)III only
C)II and IV only
D)I and IV only
E)II and III only

Question

Quizplus · Accepted Answer

III only. Increasing the operating cycle means it takes longer to convert resources into cash flows. Decreasing the receivable turnover rate slows down how quickly a company collects cash from its credit sales, thus extending the operating cycle. Increasing inventory turnover or decreasing inventory levels (I and IV) would actually shorten the operating cycle. Increasing the payables period (II) delays cash outflows but doesn't directly affect the speed of converting inventory to cash.

Which of the Following Will Increase the Operating Cycle