Which of the following actions would be likely to shorten the cash conversion cycle?
A) Change the credit terms offered to customers from 3/10 net 30 to 1/10 net 50.
B) Begin to take cash discounts on inventory purchases; the terms are 2/10 net 30.
C) Adopt a new manufacturing process that saves some labor costs but slows down the conversion of raw materials to finished goods from 10 days to 20 days.
D) Change the credit terms offered to customers from 2/10 net 30 to 1/10 net 60.
E) Adopt a new manufacturing process that speeds up the conversion of raw materials to finished goods from 20 days to 10 days.

Question

Quizplus · Accepted Answer

Shortening the time it takes to convert raw materials to finished goods will result in a shorter cash conversion cycle, as finished goods can be sold and converted into cash more quickly. The other options involve either extending credit terms or taking longer to convert inventory or raw materials into finished goods, which would lengthen the cash conversion cycle.

Which of the Following Actions Would Be Likely to Shorten