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Ch18+Answers+to+assigned+problems+v7 - CHAPTER18 SHORT-TERM...

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CHAPTER18 SHORT-TERM FINANCE AND PLANNING 3. (LO1) a. Increase. If receivables go up, the time to collect the receivables would increase, which increases the operating cycle. b. Increase. If credit repayment times are increased, customers will take longer to pay their bills, which will lead to an increase in the operating cycle. c. Decrease. If the inventory turnover increases, the inventory period decreases. d. No change. The accounts payable period is part of the cash cycle, not the operating cycle. e. Decrease. If the receivables turnover increases, the receivables period decreases. f. No change. Payments to suppliers affects the accounts payable period, which is part of the cash cycle, not the operating cycle. 6. (LO1) The operating cycle is the inventory period plus the receivables period. The inventory turnover and inventory period are: Inventory turnover = COGS/Average inventory Inventory turnover = $56,384/{[$9,780 + 11,380]/2} Inventory turnover = 5.3293 times Inventory period = 365 days/Inventory turnover Inventory period = 365 days/5.3293 Inventory period = 68.49 days
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