A firm can reduce the cash conversion cycle by selling fewer goods on credit and more for cash.

Question

Quizplus · Accepted Answer

The cash conversion cycle is the time it takes a firm to convert their investment in inventory to cash received from customers. Selling fewer goods on credit and more for cash would result in faster cash flow and a shorter cash conversion cycle. This is because the firm would be receiving cash immediately instead of waiting for payment from customers who purchased on credit, which can take longer to receive.

A Firm Can Reduce the Cash Conversion Cycle by Selling