ABC Manufacturing historically produced products that were held in inventory until they could be sold to a customer.The firm is now changing its policy and only producing a product when it receives an actual order from a customer.All else equal,this change will:

Question

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By only producing a product when there is an actual order from a customer, ABC Manufacturing will no longer need to hold inventory for an extended period, which will decrease the cash cycle. This change should not affect the operating cycle, trade receivables period, trade payables period or inventory turnover rate, as the manufacturing process will still involve the same steps and timings, but only begin once an order has been received. Therefore, the best choice is D, as it directly relates to the change in policy towards inventory management.

ABC Manufacturing Historically Produced Products That Were Held in Inventory