A firm can reduce its cash conversion cycle by
A) increasing its average age of inventory
B) increasing its average collection period
C) decreasing its average payment period
D) decreasing the number of customers buying on credit

Question

Quizplus · Accepted Answer

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. Decreasing the number of customers buying on credit can reduce the average collection period, thereby shortening the cash conversion cycle. Increasing the average age of inventory or collection period, or decreasing the average payment period, would instead lengthen the cycle.

A Firm Can Reduce Its Cash Conversion Cycle by