Effects of an operating cycle


Problem: Indicate the effect that the following will have on the operating cycle. Use the letter I to indicate an increase, the letter D for a decrease, and the letter N for no change.

a. Average receivables go up

b. Credit payment time for customers are increased

c. Inventory turnover goes from 3 times to 7 times

d. Payables turnover goes from 6 times to 11 times

e. Receivables turnover goes from 7 to 9 times

f. Payment to suppliers are accelerated

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Accounting Basics: Effects of an operating cycle
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