A firm's goal should be to lengthen the cash conversion cycle since shorter cash conversion cycles leads firms to increase their dependence on costly external financing.

Question

Quizplus · Accepted Answer

A firm's goal should be to shorten the cash conversion cycle, as this means they are able to collect cash from their customers more quickly, which improves their cash flow and reduces the need for external financing. Lengthening the cash conversion cycle would have the opposite effect and increase dependence on external financing.

A Firm's Goal Should Be to Lengthen the Cash Conversion