Which of the following factors, all else equal, is most likely to decrease a firm's cash...

Question

Question

Which of the following factors, all else equal, is most likely to decrease a firm's cash cycle?

business finance

Answer 1

Answer #1

The correct answer is A.

An increase to accounts receivable turnover decreases the Days Sales Outstanding (DSO) and hence decreases a firm's cash cycle.

CCC = DSO + DIO - DPO

DSO = 365/(Accounts receivables turnover)

If Accounts receivables turnover increases, DSO decreases, and hence CCC decreases.

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Answer 2

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