Indicate the effect of the following on the cash cycle: Accounts Receivable Period (AR Period) goes...

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Indicate the effect of the following on the cash cycle: Accounts Receivable Period (AR Period) goes...

Indicate the effect of the following on the cash cycle: Accounts Receivable Period (AR Period) goes down

Note: AR Period is also called as the Average Collection Period

Group of answer choices

Decrease

Increase

No change

No answer text provided.

business finance

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Answer 1

Answer #1

The correct answer is Decrease.

Note:

cash cycle is computed as Operating Cycle - Payable Period, Further, Operating Cycle = Inventory Period + Receivables Period. When the Receivables Period goes down, the operating cycle also goes down, Since the cash cycle takes into consideration the operating cycle, the cash cycle also goes down.

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Answer 2

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