Question

What impact did this change in payables policy have on BlueSky's operating cycle? Its cash cycle? 

   What impact did this change in payables policy have on BlueSky's operating cycle? Its cash cycle?
Fundamentals of Corporate Finance
Fundamentals of Corporate Finance
Stephen A. Ross;… 11th Edition
Chapter 18, Problem 6 ↓

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This change would have a direct impact on BlueSky's operating cycle and cash cycle. The operating cycle is the time it takes for a company to convert its inventory into cash. It includes the time it takes to sell inventory, collect accounts receivable, and pay  Show more…

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What impact did this change in payables policy have on BlueSky's operating cycle? Its cash cycle?
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Key Concepts

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Operating Cycle
The operating cycle is the total time span from acquiring inventory to collecting cash from customers. It encompasses the entire process of purchasing or producing goods, selling them, and obtaining payment, thus reflecting the efficiency of a company’s core business operations.
Cash Cycle
The cash cycle, or cash conversion cycle, measures the time between when a company pays for its supplies and when it actually receives cash from its customers. This metric is derived by adjusting the operating cycle to account for the period the company can defer payments to suppliers, thus indicating the effective liquidity and cash management.
Payables Policy
A payables policy outlines the guidelines for payment timings to suppliers. Changes to this policy, such as extending the time frames for payment, directly affect the cash conversion cycle by delaying cash outflows, which can enhance liquidity and shorten the period during which cash is tied up in operations.
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