Question

Which one of the following will decrease the operating cycle? Group of answer choices increasing the accounts payable turnover rate paying accounts payable faster decreasing the inventory turnover rate collecting accounts receivable faster discontinuing the discount given for early payment of an accounts receivable

Answer 1

Answer:

Collecting accounts receivable faster

Explanation:

Operating cycle states that the period of time between purchase of inventory and the group of receivable cash. The operating cycle depends on the period of the inventory and the period of receivables for the accounts. Here if the operating cycle is rising that the inventory duration and the receivable period of accounts also increase. Increasing periods of inventories and receivables will lead to a long operating cycle.

Thus, If the receivables for the accounts are obtained at a faster pace, the operating period will decrease.