ACCA FM · Chapter 3 · Question 6 of 10
Which of the following, taken on its own, would SHORTEN a company's cash operating cycle?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Taking longer to pay trade suppliers
Explanation
The cash operating cycle equals inventory days plus receivables days less payables days. Increasing payables days therefore reduces the cycle. Longer credit for customers and higher inventory lengthen the cycle, and paying suppliers sooner reduces payables days, which also lengthens the cycle.
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