Answer-If a financial analyst decreases the 'Days Sales Outstanding' (DSO) assumption in a 5-year projectio...

Days Sales Outstanding DSO measures the average time it takes a company to collect cash after a sale. Lowering the DSO means the company collects cash from its customers faster. On the projected Balance Sheet, this reduces the Accounts Receivable balance. On the Cash Flow Statement, a decrease in an operating asset represents a cash inflow, thereby increasing the projected Operating Cash Flow for that period. Revenue and Net Income remain unaffected because the absolute volume of credit sales did not change.

Question

If a financial analyst decreases the "Days Sales Outstanding" (DS

O assumption in a 5-year projection model while keeping the revenue forecast unchanged, how will this adjustment alter the projected financial statements?

A Accounts Receivable will increase, causing projected Operating Cash Flow to decrease.

B Net Income will increase due to immediate revenue acceleration.

C Accounts Receivable will decrease, resulting in an increase in projected Operating Cash Flow.

D Accounts Payable will decrease, creating a net reduction in cash balances.

E The model's projected working capital will remain entirely unchanged.

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