If the cash conversion cycle shortens, then the firm's investment in inventories and receivables will always be smaller.

Question

Quizplus · Accepted Answer

A shorter cash conversion cycle indicates that a company is more efficient in managing its working capital, but it doesn't necessarily mean the firm's investment in inventories and receivables will always be smaller. The cycle can be shortened by faster collection of receivables or extending payables, without necessarily reducing inventories or receivables.

If the Cash Conversion Cycle Shortens, Then the Firm's Investment