A Firm Could Reduce Its Cash Conversion Cycle by

question 25

Multiple Choice

A firm could reduce its cash conversion cycle by

• A) increasing the average collection period.
• B) increasing the average payment period.
• C) decreasing the average payment period.
• D) increasing the inventory conversion period.

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Definitions:

Month-end Bank Statement

A document provided by a bank summarizing the account’s activity and balances over the last month, used for reconciling the bank account.

Erroneously Charged

Refers to a financial transaction or fee that has been incorrectly applied to an account.

Outstanding Checks

Checks issued by a company that have not yet been cashed or cleared by the bank, considered in reconciling the bank statement.

Month-end Bank Statement

A document issued by a bank summarizing the transactions in an account for the month, including the final balance.