A positive cash conversion cycle indicates that the…
A) operating cycle exceeds the average payment period.
B) average payment period is greater than the operating cycle.
C) firm is lengthening its average payment period and lengthening its average collection period.
D) shortening its average collection period and lengthening its inventory period.

Question

Quizplus · Accepted Answer

A positive cash conversion cycle means that the company is taking longer to collect payments from customers than it is taking to pay suppliers and other expenses. This indicates that the operating cycle (time taken to convert inventory into cash) exceeds the average payment period.

A Positive Cash Conversion Cycle Indicates That The…