AICPA Exam CPA-Business Topic 1 Question 44 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 44
Topic #: 1

An increase in sales collections resulting from an increased cash discount for prompt payment would be expected to cause a (n):

AIncrease in the operating cycle.

BIncrease in the average collection period.

CDecrease in the cash conversion cycle.

DIncrease in bad debt losses.

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. An increase in sales collections would decrease the cash conversion cycle.

Choice 'a' is incorrect because the operating cycle (as well as the cash conversion cycle) would decrease.

Choice 'b' is incorrect, as the average collection period would decrease.

Choice 'd' is incorrect. Bad debt losses would decrease from an increase in sales collections.

by Delmy at May 07, 2022, 11:56 PM

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