Question

4. The Green Fiddle decreased its operating cycle from 155 days to 145 days while the cash cycle increased by 10 days. How have these changes affected the accounts payable period?

Group of answer choices

Decreased by 20 days

Decreased by 10 days

No change

Increased by 10 days

Increased by 20 days

Answer 1

1. Operating cycle is decrease by 10 days which means the Days sales in inventory and days sales outstanding are reduced by 10 days. because of this there will be a 10 days reduction in Cash cycle

2. The cash cycle is increased by by 10 days which means (Days sales in inventory + days sales outstanding - Accounts payable) is increased by 10 days it will have double impact on accounts payable as it a deduction in cash cycle

By adding previous effect of reduction 10 days to current increase of 10 days the accounts payable days should have been increased by 20 days Option E