Question
Why does a higher days of payables outstanding usually improve liquidity?
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Answer
The firm keeps cash longer by paying suppliers later.
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Question
How do tight credit markets create a drag on liquidity?
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Answer
They restrict borrowing capacity, reducing available short-term funding.
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Question
Why does an increase in days of inventory on hand worsen liquidity?
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Answer
Cash is locked in inventory longer before sale.
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Question
Why are uncollected receivables considered a drag on liquidity?
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Answer
They delay cash inflows; rising DSO ties up cash longer.
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