In order to achieve a negative cash conversion cycle a firm would want to:
A) increase its account payable period and its inventory turns.
B) decrease its account payable period and its inventory turns.
C) increase its account payable terms and decrease its inventory turns.
D) decrease its account payable terms and increase its inventory turns.
E) analyze systems and stop whatever processes are causing this, since a negative cash conversion cycle is associated with losses, not profits.

Question

Quizplus · Accepted Answer

A negative cash conversion cycle indicates that a company is able to delay its payments long enough that it can sell its inventory and collect the receivables before it needs to pay its suppliers. Increasing the accounts payable period allows the company more time to pay its suppliers, and increasing inventory turns means the company sells its inventory faster. Both actions contribute to achieving a negative cash conversion cycle.

In Order to Achieve a Negative Cash Conversion Cycle a Firm