Question

Which action would NOT be likely to shorten the length of the cash conversion cycle? a....

Which action would NOT be likely to shorten the length of the cash conversion cycle?

a.

adopting a new inventory system that reduces the inventory conversion period
b.

reducing the average DSO on its accounts receivable
c.

reducing the amount of time the company takes to pay its suppliers
d.

increasing sales while maintaining the same level of receivables
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The cash conversion cycle is computed as follows:

= Receivable period + Days of Inventory - Days payable

As can be clearly seen in the above formula, If we reduce the amount of time the company takes to pay its suppliers will lead to increase in the cash conversion cycle.

Hence the correct answer is option c.

All other options as mentioned in the question will lead to decrease in the cash conversion cycle

Feel free to ask in case of any query relating to this question

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A firm wants to sharply reduce its cash conversion cycle. Which of the following steps would...
A firm wants to sharply reduce its cash conversion cycle. Which of the following steps would reduce its cash conversion cycle? The company increases its average inventory without increasing its sales. The company reduces its days sales outstanding (DSO). The company starts paying its bills sooner, which reduces its average accounts payable without reducing its sales. Statements A and B are correct.
Which of the following would SHORTEN the firm's Operating Cycle all other elements remaining the same...
Which of the following would SHORTEN the firm's Operating Cycle all other elements remaining the same (unchanged)? A Increasing the average inventory held during the period. B Providing less favorable credit terms to key customers, and shortening the days sales in Accounts Receivable. C Delaying payments to suppliers D Investing in new plant and equipment E None of the above would shorten the firm's operating cycle
Increased Efficiency, Inc. is looking for ways to shorten its cash conversion cycle. It has annual...
Increased Efficiency, Inc. is looking for ways to shorten its cash conversion cycle. It has annual sales of $36,500,000, or $100,000 a day on a 365-day basis. The firm's cost of goods sold is 65% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies would reduce sales by...
Increased Efficiency, Inc. is looking for ways to shorten its cash conversion cycle. It has annual...
Increased Efficiency, Inc. is looking for ways to shorten its cash conversion cycle. It has annual sales of $36,500,000, or $100,000 a day on a 365-day basis. The firm's cost of goods sold is 70% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies would reduce sales by...
Increased Efficiency, Inc. is looking for ways to shorten its cash conversion cycle. It has annual...
Increased Efficiency, Inc. is looking for ways to shorten its cash conversion cycle. It has annual sales of $36,500,000, or $100,000 a day on a 365-day basis. The firm's cost of goods sold is 75% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies would reduce sales by...
Increased Efficiency, Inc. is looking for ways to shorten its cash conversion cycle. It has annual...
Increased Efficiency, Inc. is looking for ways to shorten its cash conversion cycle. It has annual sales of $36,500,000, or $100,000 a day on a 365-day basis. The firm's cost of goods sold is 80% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies would reduce sales by...
Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales...
Whitson Co. is looking for ways to shorten its cash conversion cycle. It has annual sales of $45,625,000, or $125,000 a day on a 365-day basis. The firm's cost of goods sold is 60% of sales. On average, the company has $7,500,000 in inventory, $5,750,000 in accounts receivable, and $2,750,000 in accounts payable. Its CFO has proposed new policies that would result in a 25% reduction in both average inventories and accounts receivable, and a 10% increase in average accounts...
Problem 16-11 Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 62 days, an...
Problem 16-11 Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 62 days, an average collection period of 35 days, and a payables deferral period of 36 days. Assume that cost of goods sold is 80% of sales. Assume 365 days in year for your calculations. What is the length of the firm's cash conversion cycle?   days If Negus's annual sales are $3,705,000 and all sales are on credit, what is the firm's investment in accounts receivable? Round...
Problem 21-11 Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 59 days, an...
Problem 21-11 Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 59 days, an average collection period of 47 days, and a payables deferral period of 31 days. Assume that cost of goods sold is 80% of sales. Assume 365 days in year for your calculations. What is the length of the firm's cash conversion cycle? days If Negus's annual sales are $3,651,525 and all sales are on credit, what is the firm's investment in accounts receivable? Round...
Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 60 days, an average collection...
Cash Conversion Cycle Negus Enterprises has an inventory conversion period of 60 days, an average collection period of 48 days, and a payables deferral period of 27 days. Assume that cost of goods sold is 80% of sales. Assume a 365-day year. Do not round intermediate calculations. What is the length of the firm's cash conversion cycle? Round your answer to the nearest whole number. ___days If annual sales are $4,124,500 and all sales are on credit, what is the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT