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 answer text provided.

No change

business finance

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Answer 1

Answer #1

Ans. Option 1st. Decrease

Explanation: Cash cycle is calculated by using the following formula:

Cash cycle = Average collection period + Days in inventory - Average payment period

*Now it is clear from above equation that if the average collection period goes down (decreases) then the cash cycle will also decrease.

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Answer 2

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