Respuesta :
If a company's operating cycle is much longer than its average payment period for suppliers, it creates the need to borrow money to fund its inventories and accounts receivable is a False statement.
If the acid-test ratio is less than one, then paying off some current liabilities with cash will increase the acid-test (quick) ratio is a false statement.
When an organization's operational cycle is significantly longer than its typical supplier payment time, it becomes necessary to borrow money to finance its inventories and accounts receivable.
What is operating cycle
The time it takes for a business to purchase items, sell them, and get payment for those sales is referred to as an operating cycle. To put it another way, it indicates how long it takes a business to convert its inventories into cash.
The industry will determine how long this operating cycle will be. By providing a sense of whether or not it will be able to pay off any creditors, an understanding of a company's operating cycle will help establish its financial health.
For instance, a short operating cycle for the company means that payments will come in steadily. The more quickly the business generates income, the better off it will be in terms of clearing any outstanding obligations or
When the acid-test ratio is less than one, the purchase of inventory with cash affect each ratio by No change to the current ratio and decrease the acid-test ratio.
What do acid-test ratio and current ratio mean?
While the acid-test ratio is computed as current assets plus inventories divided by current liabilities, the current ratio is equal to current assets minus current liabilities.
Both the current ratio and the acid-quick ratio are crucial for a corporation since they help assess a company's capacity to settle its short-term obligations.
Inconlusion While the acid-test ratio should be reduced, the current ratio should remain constant.
Read more about operating cycle
brainly.com/question/26482515
#SPJ4
