Other factors remaining constant, a decrease in the average age of inventory will result in ________.
A) a decrease in the average collection period
B) a decrease in the cash conversion cycle
C) an increase in the cash conversion cycle
D) an increase in the average collection period

Question

Quizplus · Accepted Answer

The cash conversion cycle is the time period between the payment to suppliers and the collection from customers. A decrease in the average age of inventory means that inventory is being sold more quickly, which reduces the amount of time inventory is held and the cash conversion cycle. Therefore, the correct choice is B.

Other Factors Remaining Constant, a Decrease in the Average Age