For minimizing the cash conversion cycle, a firm should ________.
A) grant longer credit terms to customers to maintain healthy business relations
B) pay off accounts payables as fast as possible to gain credibility
C) turn over inventory as quickly as possible without stockouts
D) increase mail managing, processing, and clearing time when collecting from customers

Question

Quizplus · Accepted Answer

Minimizing the cash conversion cycle involves reducing the time it takes to convert inventory into cash, and turning over inventory as quickly as possible without stockouts is an effective way to achieve this. Granting longer credit terms to customers or increasing mail processing time when collecting from customers can actually increase the time it takes to collect cash, thus lengthening the cash conversion cycle. Paying off accounts payables quickly is helpful, but not as effective as quick inventory turnover in reducing the cycle.

For Minimizing the Cash Conversion Cycle, a Firm Should ________