Question

A company currently has a 51 day cash cycle.Assume the firm changes its operations such that it decreases its receivables period by 2 days,increases its inventory period by 3 days,and increases its payables period by 4 days.What will the length of the cash cycle be after these changes?
A) 42 days
B) 45 days
C) 48 days
D) 49 days
E) 51 days

Answer 1

Answer:

E) 51 days

Explanation:

Calculation of length of the cash cycle after the changes.

As given:

Current cash cycle = 51 days.

Decreases its receivables period by 3 days

Increases its inventory period by 4 days.

Increases its payables period by 1 day.

Hence,

Cash cycle = 51 days - 3 days + 4 days- 1 day

Cash cycle = 51 day

Therefore the cash cycle after the changes will be 51 days