Explore BrainMass
Share

Explore BrainMass

    Effects of an Operating cycle.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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

    © BrainMass Inc. brainmass.com October 9, 2019, 7:59 pm ad1c9bdddf
    https://brainmass.com/business/inventory/effects-of-an-operating-cycle-135328

    Solution Preview

    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.

    Operating Cycle (OC) = Average Age of Inventory (AAI) + Average Collection Period (ACP)
    Cash Conversion Cycle (CCC) = Average Age of Inventory (AAI) + Average Collection Period (ACP) - Average Payables Period (APP)
    Or Cash Conversion Cycle (CCC) = Operating Cycle (OC) - Average Payables Period (APP)
    Thus Operating Cycle is affected by Days in Inventory (AAI) and Days in Accounts ...

    Solution Summary

    The solution discusses the effect on the operating cycle of changes in receivables, credit payment time, inventory turnover, payables turnover, receivables turnover, acceleration of payment to suppliers.

    $2.19