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CFA Level 1
Corporate Finance

Impact of Increased Average Collection Period on Cash Flow

Easy Working Capital Management Accounts Receivable Management

ABC Corporation is analyzing its accounts receivable performance as part of its working capital management strategy. The company observes that its Average Collection Period (ACP) has increased from 30 days to 45 days over the last year. This change has raised concerns about the efficiency of its credit policies and the potential impact on cash flow.

Given this situation, what is the most likely implication of the increased Average Collection Period for ABC Corporation?

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