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.
Payments to suppliers are accelerated.
Goods can be purchased on credit if the seller has an option to sell them on credit. The seller records a current asset called receivables representing the amount of credit sales and the buyer records a current liability called accounts payable representing the amount owed to the seller for the purchases.
Answer and Explanation: 1
The indications are made below:
|Payments to suppliers are accelerated.||The operating cycle will not change (N)....|
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fromChapter 22 / Lesson 42
An operating cycle consists of lead time, production time, sales time, delivery time, and cash-collection time. Learn the definitions of the parts of the operating cycle, how long the operation cycles are for different industries, and the formula used for calculating the operating cycle in accounting.