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How an increase in cash operating cycle will decrease profitability?
You effectively asked the same thing in reverse yesterday (and I answered you)!!
A increase in the cash operating cycle happens because they are taking longer to collect debts or are carrying more inventories. The more cash tied up in receivables and inventories then the less interest they could be earning on the cash (or the more interest they will have to pay if it means having to borrow money) – in either case this results in lower profits.
Didn’t get you
Increase in operating cycle can increase profits receivable will be higher
See my other answer.
An increase in the operating cycle means that receivables days are higher – it does not necessarily mean that they are selling more and does not mean higher profits.
Ok
