Helena Furnishings wants to reduce its cash conversion cycle.Which of the following actions should it take?
A) Increases average inventory without increasing sales.
B) Take steps to reduce the DSO.
C) Start paying its bills sooner,which would reduce the average accounts payable but not affect sales.
D) Sell common stock to retire long-term bonds.
E) Sell an issue of long-term bonds and use the proceeds to buy back some of its common stock.

Question

Quizplus · Accepted Answer

By taking steps to reduce Days Sales Outstanding (DSO), Helena Furnishings can collect its accounts receivables faster, thereby reducing the cash conversion cycle. Increasing average inventory without increasing sales (Option A) and starting to pay bills sooner (Option C) may not necessarily result in a reduction in the cash conversion cycle. Selling common stock to retire long-term bonds (Option D) and selling an issue of long-term bonds to buy back common stock (Option E) have no direct impact on the cash conversion cycle.

Helena Furnishings Wants to Reduce Its Cash Conversion Cycle