The longer the cash conversion cycle, the greater the potential for cash flow problems to exist for a company.

Question

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The cash conversion cycle represents the time it takes for a company to turn its investments in inventory into cash received from sales. A longer cash conversion cycle means that a company is taking more time to collect cash from customers, and therefore, has less cash available for other operational expenses. This can lead to cash flow problems, making A the correct answer.

The Longer the Cash Conversion Cycle, the Greater the Potential