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

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By acquiring products only when there is an actual order from a customer, ABC will be able to decrease the cash cycle, as it will no longer need to hold inventory before making a sale. This means that cash will be tied up for a shorter period of time, resulting in a shorter cash cycle. The operating cycle may be shortened as well, as there may be less time between receiving an order from a customer and delivering the product to them. The accounts payable and accounts receivable periods are not necessarily affected by this change in policy. The inventory turnover rate may increase or decrease depending on the specifics of the situation.

ABC Historically Acquired Products That Were Held in Inventory Until