A company wishes to reduce the amount of working capital it requires to finance its operations. Which of the following would be the least effective way of reducing working capital requirements?

Question

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Refusing to sell on credit to any customer would likely result in a significant decrease in sales, which could have a negative impact on the company's overall liquidity and profitability. The other options (A, C, and D) all involve managing and improving the company's cash conversion cycle, which can effectively reduce working capital requirements. By improving collections from debtors, offering discounts for early payment, and extending the payment time for accounts payable, the company can effectively manage its cash inflows and outflows, reducing its need for working capital.

A Company Wishes to Reduce the Amount of Working Capital