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?

Question

Business

Kameron

23 December, 16:40

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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Answers (1)

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Lilly Davenport · Answer 1

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