Asked by Cheng Tso Hsieh on Jul 06, 2024
Verified
Changing credit terms to require payment in 30 days rather than 20 will likely increase the firm's cash cycle.
Firm's Cash Cycle
The length of time it takes a company to convert its investments in inventory and other resources into cash flows from sales.
- Determine the effects of credit policies on cash flows and the duration of the cash cycle.
Verified Answer
IB
Ishiyihmie BurrellJul 12, 2024
Final Answer :
True
Explanation :
Extending the payment terms from 20 to 30 days increases the duration before cash is received, thereby lengthening the cash conversion cycle.
Learning Objectives
- Determine the effects of credit policies on cash flows and the duration of the cash cycle.
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