Final answer:
Reducing accounts receivable collection time is the action that will decrease the operating cycle by allowing the company to collect cash more quickly from customers. This directly impacts the operating cycle's efficiency, as compared to the other options provided which may not have a direct or immediate impact.
Step-by-step explanation:
The student is asking which action will decrease the operating cycle. The operating cycle is the period between the acquisition of inventory and when cash is collected from receivables. It is important because a shorter operating cycle means a company can convert its inventory into cash quickly, which is beneficial for the business's cash flow and financial health.
To address the options provided:
- Increasing inventory turnover will decrease the operating cycle because the company is selling and replacing inventory more quickly.
- Extending the accounts payable period will not necessarily decrease the operating cycle, as while it might improve cash flow temporarily, it does not affect the speed at which inventory is sold or receivables are collected.
- Reducing accounts receivable collection time will decrease the operating cycle by allowing the company to collect cash sooner from customers.
- Lengthening the production process will increase the operating cycle as it would take longer to have the inventory available for sale.
Therefore, when considering the options, both increasing inventory turnover and reducing accounts receivable collection time would help decrease the operating cycle. However, when we have to choose only one option, we select the option that has a direct impact on the cycle's efficiency: Reducing accounts receivable collection time. This action ensures that cash is collected faster from sales, thus directly shortening the cycle.
Mentioning the correct option in the final answer: Reducing accounts receivable collection time is the action that will decrease the operating cycle.