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:

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By only producing goods when there is an actual order, ABC Manufacturing is reducing the amount of inventory it holds. This means that it will have less tied up cash in inventory, thereby decreasing the cash cycle. The operating cycle, accounts receivable period, and accounts payable period are all dependent on the specific nature of the manufacturing process and customer payment policies, respectively, and are not necessarily impacted by this change. The inventory turnover rate may change, but it is not necessarily decreasing.

ABC Manufacturing Historically Produced Products That Were Held in Inventory