Improvements to cash management include ________.
A) a reduction in the cash turnover
B) a reduction in the cash conversion cycle
C) an increase in the average age of inventory
D) an increase in the credit period allowed to customers

Question

Quizplus · Accepted Answer

A reduction in the cash conversion cycle is an improvement to cash management. This involves reducing the time it takes to convert inventory into sales and then into cash, which can free up cash for other uses. A reduction in the cash turnover (choice A) would indicate that the company is holding onto cash for longer periods, which may not be efficient. An increase in the average age of inventory (choice C) means that inventory is being held for longer periods, which can tie up cash unnecessarily. An increase in the credit period allowed to customers (choice D) would also tie up cash, as the company would be waiting longer for customers to pay their bills.

Improvements to Cash Management Include ________