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31 July, 00:23

Peterson's Antiquities currently has a 31 day cash cycle. Assume the firm changes its operations such that it decreases its receivables period by 2 days, decreases its inventory period by 3 days, and decreases its payables period by 4 days. What will the length of the cash cycle be after these changes?

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  1. 31 July, 02:56
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    Answer: 30 days

    Explanation: Cash cycle refers to the amount of time it takes for a business from paying cash to its suppliers for raw materials and receiving cash from its customers fro the sales made.

    Hence from the above we can say that : -

    decrease in inventory will decrease the cycle.

    Decrease in receivables will decrease the cycle.

    decrease in payables will increase the cycle.

    Thus,

    cash cycle = 31 days - 2 days + 4 days - 3 days

    = 30 days
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