Reference no: EM132266789

1. Indicate the impact of the following on the cash and operating cycles, respectively. Use the letter ‘I’ to indicate an increase, the letter ‘D’ for a decrease, and the letter ‘N’ for no change. a. The terms of cash discounts offered to customers are made less favorable. b. The cash discounts offered by suppliers are decreased; thus, payments are made earlier. c. An increased number of customers begin to pay in cash instead of with credit. d. Fewer raw materials than usual are purchased. e. A greater percentage of raw material purchases are paid for with credit. f. More finished goods are produced for inventory instead of for order.

2. The operating cycle is the period from inventory purchase until the receipt of cash. Different company characteristics generally define the type of operating cycle that a firm experiences. Five different types of companies are: 1) A convenience store, 2) A furniture store, 3) A car manufacturer, 4) A bookstore, and 5) An oil-field drilling equipment company. Of the companies listed, select the one you believe would have: 1) The longest operating cycle, 2) The shortest operating cycle, 3) The most unpredictable operating cycle, and 4) The operating cycle most susceptible to changes in payment terms.