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Which one of the following statements is most correct if a seller extends credit to a purchaser for a period of time longer than the purchaser's operating cycle? The seller:
Choice 'b' is correct. If a seller extends credit to a purchaser for a period of time longer than the purchaser's operating cycle, the seller is, in effect, financing more than just the purchaser's inventory needs.
Choice 'a' is incorrect. Accounts receivable would be higher than those companies whose credit period is shorter than the purchaser's operating cycle.
Choice 'c' is incorrect. Seller is financing the purchaser, but not necessarily long-term assets.
Choice 'd' is incorrect. It is appropriate for the seller to have stated policies for discount rate and credit periods.