a.
To identify: The effect of operational changes on cash cycle and on operating cycle, as an increase, decrease and no change.
Cash Cycle:
The time period between the payment of cash to the supplier for the purchase of raw material and the receipt of cash from the customer for the sale of product is known as cash cycle of a business. If the cash cycle is shorter the amount of the available cash is more and the company has no need to borrow cash from outsiders.
Operating Cycle:
Operating cycle is a time period between the sale of product and the recovery of cash from the customer. Operating cycle is also known as the business cycle, it involves every quantitative business activity of the company.
b.
To identify: The effect of operational changes on cash cycle and on operating cycle, as an increase, decrease and no change.
Cash Cycle:
The time period between the payment of cash to the supplier for the purchase of raw material and the receipt of cash from the customer for the sale of product is known as cash cycle of a business. If the cash cycle is shorter the amount of the available cash is more and the company has no need to borrow cash from outsiders.
Operating Cycle:
Operating cycle is a time period between the sale of product and the recovery of cash from the customer. Operating cycle is also known as the business cycle, it involves every quantitative business activity of the company.
c.
To identify: The effect of operational changes on cash cycle and on operating cycle, as an increase, decrease and no change.
Cash Cycle:
The time period between the payment of cash to the supplier for the purchase of raw material and the receipt of cash from the customer for the sale of product is known as cash cycle of a business. If the cash cycle is shorter the amount of the available cash is more and the company has no need to borrow cash from outsiders.
Operating Cycle:
Operating cycle is a time period between the sale of product and the recovery of cash from the customer. Operating cycle is also known as the business cycle, it involves every quantitative business activity of the company.
d.
To identify: The effect of operational changes on cash cycle and on operating cycle, as an increase, decrease and no change.
Cash Cycle:
The time period between the payment of cash to the supplier for the purchase of raw material and the receipt of cash from the customer for the sale of product is known as cash cycle of a business. If the cash cycle is shorter the amount of the available cash is more and the company has no need to borrow cash from outsiders.
Operating Cycle:
Operating cycle is a time period between the sale of product and the recovery of cash from the customer. Operating cycle is also known as the business cycle, it involves every quantitative business activity of the company.
e.
To identify: The effect of operational changes on cash cycle and on operating cycle, as an increase, decrease and no change.
Cash Cycle:
The time period between the payment of cash to the supplier for the purchase of raw material and the receipt of cash from the customer for the sale of product is known as cash cycle of a business. If the cash cycle is shorter the amount of the available cash is more and the company has no need to borrow cash from outsiders.
Operating Cycle:
Operating cycle is a time period between the sale of product and the recovery of cash from the customer. Operating cycle is also known as the business cycle, it involves every quantitative business activity of the company.
f.
To identify: The effect of operational changes on cash cycle and on operating cycle, as an increase, decrease and no change.
Cash Cycle:
The time period between the payment of cash to the supplier for the purchase of raw material and the receipt of cash from the customer for the sale of product is known as cash cycle of a business. If the cash cycle is shorter the amount of the available cash is more and the company has no need to borrow cash from outsiders.
Operating Cycle:
Operating cycle is a time period between the sale of product and the recovery of cash from the customer. Operating cycle is also known as the business cycle, it involves every quantitative business activity of the company.
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Chapter 26 Solutions
CORPORATE FINANCE(LL)
- An increase in accounts receivable is deducted from net income to obtain operating cash flows because a. cash collections increased due to increasing sales. b. cash collections from customers were less than the revenues reported. c. cash collections decreased due to declining sales. d. cash collections from customers were greater than the revenues reported. e. None of these.arrow_forwardWhich of the following best represents a positive product of a lower number of days sales in receivables ratio? A. collection of receivables is quick, and cash can be used for other business expenditures B. collection of receivables is slow, keeping cash secured to receivables C. credit extension is lenient D. the lender only lends to the top 10% of potential creditorsarrow_forwardIf cash is collected at the sale:A.the operating cycle will be longer than if sold on creditB.the account payable will be decreased as a result of the saleC.the operating cycle will be shorter than if sold on creditD.the account receivable will be increased a a result of the salearrow_forward
- Question: a) when business sells goods on credit, there is a decrease in cash. reqiured: please answer this question by stating whether this statement is true or false.arrow_forwardWhich of the following statements is most correct? a. A cash management system that maximizes collections float while minimizing disbursement float is preferable to one that has lower collections float while increasing disbursement float. b. Other things held constant, a firm will need a smaller line of credit if it can arrange to pay its bills by the 5th of each month than if its bills come due uniformly during the month. c. None of the statements are correct. d. The use of a lockbox is intended to reduce cash theft losses. In the event that if the cost of the lockbox is less than the theft losses avoided, the lockbox should be installed. e. A cash management system that minimizes collections float while increasing disbursement float outperforms one with higher collections float but lower disbursement float.arrow_forwardPoint out one of the following that will increase the operating cash cycle?A Increase in inventory daysB Decrease in trade receivable daysC Increase in trade payable daysD Decrease in inventory dayarrow_forward
- A change in credit policy has caused an increase in sales, an increase in discounts taken, a reduction in the investment in accounts receivable, and a reduction in the number of doubtful accounts. Based upon this information, we know that a)Net income has increased b)The average collection period has decreased. c)Gross profit has declines d)The size of of the discount offered has increasedarrow_forwardWhich of the following is correct with regards to cash discounts offering? a. It is used lengthen the cash conversion cycle without putting pressure the clients b. Investment in accounts receivable will likely grow since more customers will pay on a later date c. Bad debts expense will probably decrease since customers more likely take the advantage of discounts d. These are granted because customer acquires high quantity of products and goodsarrow_forwardQuestion Which of the following changes in credit standards and conditions would cause an improvement in profit? A) Increase in the turnover of accounts receivable B) Decrease in units sold C) Increase in collection expenses D) An increase in the percentage of doubtful accounts receivable.arrow_forward
- Which of the following is a positive sign that a company can quickly turn its receivables into cash? a. A low receivables turnover ratio.b. A high receivables turnover ratio.c. A low average collection period.d. Both a high receivables turnover ratio and a low average collection period.arrow_forwardQuestion Which of the following changes in credit standards and conditions would cause an improvement in profit? A) An increase in the percentage of doubtful collections. B) An increase in collection expenses. C) Decrease in units sold D) Increase in the turnover of accounts receivable.arrow_forwardAn increase in inventories is deducted from net income to arrive at operating cash flow because a. cash payments to customers were larger than the purchases made during the period. b. purchases are larger than the cost of goods sold by the amount that inventories increased. c. cash payments to customers were less than the purchases made during the period. d. purchases are less than the cost of goods sold by the amount that inventories increased. e. All of these.arrow_forward
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