CPA-04009 Type1 M/C A-D Corr Ans: C PM#70 B 3-99 159. CPA-04009 J89 - 1.18 Page 65 An increase in sales collections resulting from an increased cash discount for prompt payment would be expected to cause a (n): a. Increase in the operating cycle. b. Increase in the average collection period. c. Decrease in the cash conversion cycle. d. Increase in bad debt losses. CPA-04009 Explanation Choice "c" is correct. An increase in sales collections would decrease the cash conversion cycle. Choice "a" is
An increase in sales collections resulting from an increased cash discount for prompt payment will decrease A/R days (which means speed up A/R turnover ratio). cash conversion cycle=A/R days +Inventory Days-A/P days. since A/R days is reduced while others remain the same, then answer c is correct.