A company has a liquidity ratio (receivables divided by payables and bank overdraft) equal to one (1). The company's ban

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A company has a liquidity ratio (receivables divided bypayables and bank overdraft) equal to one (1). The company'sbankers have requested that the company reduce its overdraft and inorder to comply, the directors are considering the impact ofreducing the credit it offers its customers
What would be the effect on the company's cash operatingcycle and liquidity (quick) ratio if credit terms were reduced fromtwo months to one month?
A. Both would decrease
B. The liquidity ratio would increase but the cashoperating cycle would be unaffected
C. Both would increase
D. The cash operating cycle would decrease but theliquidity ratio would be unaffected