A firm with a cash conversion cycle of 175 days wants to stretch its average payment period from 30 days to 45 days. This will result in a(n) ________ in the cash conversion cycle of ________ days.
A) increase; 15
B) decrease; 15
C) increase; 45
D) decrease; 45

Question

Quizplus · Accepted Answer

Stretching the average payment period from 30 days to 45 days increases the time the firm holds onto its cash before paying its suppliers, thus reducing the cash conversion cycle by 15 days.

A Firm with a Cash Conversion Cycle of 175 Days