ABC plc has a quick (liquidity) ratio (receivables plus cash divided by payables) equal to two. The directors believe that the cash balance is too low and have decided to extend the company's payment terms to suppliers from one month to two months.
What would be the effect (if any) on the company's cash operating cycle and quick (liquidity) ratio?
Operating cycle will
A.increase
B. decrease
C. not change
Quick (liquidity) ratio will
D. increase
E. decrease
F. not change
