Implications of Extending Accounts Payable Period

Hard Working Capital Management Accounts Payable Management

A company has a policy to maintain a specific relationship between its accounts payable and its overall cash flow management strategy. The accounts payable period is 30 days, and the company typically pays its suppliers within this timeframe. Recently, the finance team proposed extending the average payment period to 45 days in order to improve cash flows.

Which of the following statements best describes the financial implications of extending the accounts payable period?

Extending the accounts payable period will always lead to a decrease in the overall costs of goods sold.

Extending the accounts payable period can improve liquidity but may strain supplier relationships.

Extending the accounts payable period has no impact on cash flow management.

Hint

Submitted14.0K

Correct11.1K

% Correct79%