Helena Furnishings wants to reduce its cash conversion cycle sharply.Which action should it take?
A)The company should increase its average inventory without increasing its sales.
B)The company should reduce its DSO.
C)The company should start paying its bills sooner, which reduces its average accounts payable without reducing its sales.
D)The company should increase its DSO.

Question

Quizplus · Accepted Answer

To reduce the cash conversion cycle, the company should focus on reducing the time it takes to receive payment from customers (DSO). This will allow the company to convert its receivables to cash more quickly, thus improving its cash flow. Increasing inventory or DSO would have the opposite effect, while paying bills sooner could negatively impact the company's cash position.

Helena Furnishings Wants to Reduce Its Cash Conversion Cycle Sharply