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 discounts on inventory purchases; we buy on terms of 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 manufacturing process and speeding up the conversion of raw materials to finished goods will lead to a shorter cash conversion cycle. This means that the company can sell the finished goods and receive cash faster, reducing the time between the initial expense of raw materials and the receipt of cash from customers. All other choices would either have no effect on the cash conversion cycle or actually lengthen it.

Which of the Following Actions Would Be Likely to Shorten