- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 4. Working Capital and Liquidity
- Subject 1. Cash Conversion Cycle
CFA Practice Question
A company extends its trade credit terms by four days to all its credit customers. The most likely effect of this change to the company's credit customers is a four day ______.
A. increase in their operating cycle
B. decrease in their operating cycle
C. decrease in their net operating cycle
Explanation: A four day increase in payables will reduce the cash conversion cycle (net operating cycle) by four days.
User Contributed Comments 7
User | Comment |
---|---|
Jpsmith835 | Is a 'credit customer' not a receivable? |
tomalot | It's a receivable to you and a payable for your customer. Q is asked from their perspective |
namuhama | ouch,,, need to carefully read the question.. |
gradyf | Different between operating and net operating cycle is....? |
nmech1984 | Oper = InvDays + RecDays NetOper = Oper - PayabD |
MathLoser | OMG I didn't read the question properly. It's about the company of the customers, not my company. |
hvhjvj | Still it's A |