A buyer negotiates an extension of supplier payment terms from 30 days to 60 days, while inventory and customer payment remain unchanged. According to the lecture, which statement is MOST accurate?

Question

Accepted Answer

The buyer’s DPO increases by 30 days, so its cash conversion cycle falls by 30 days, but the supplier may face greater liquidity stress and default risk

Answer

The buyer’s DIO increases by 30 days because goods remain unpaid for longer

Answer

The buyer’s DSO increases by 30 days, so its cash conversion cycle increases

Answer

The buyer’s debt-to-equity ratio must worsen because trade credit is equivalent to additional bank debt

Crowdly

A buyer negotiates an extension of supplier payment terms from 30 days to 60 day...

Want instant access to all verified answers on moodle4.city.ac.uk?