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CFA Level 1
Corporate Finance

Advantage of Extending Accounts Payable Payment Terms

Easy Working Capital Management Accounts Payable Management

A company is analyzing its accounts payable turnover ratio in order to optimize its cash flow management. The company typically has a consistent purchasing pattern and aims to maintain good relationships with its suppliers. Recent analysis indicates that the current accounts payable turnover ratio is lower than industry standards. The company is considering extending its payment terms with suppliers to enhance cash flow. What would be the primary advantage of extending accounts payable payment terms?

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