Which of the Following Actions Would Be Likely to Shorten

question 62

Multiple Choice

Which of the following actions would be likely to shorten the cash conversion cycle?

• A) Adopt a new manufacturing process that speeds up the conversion of raw materials to finished goods from 20 days to 10 days.
• B) Change the credit terms offered to customers from 3/10,net 30 to 1/10,net 50.
• C) Begin to take discounts on inventory purchases;we buy on terms of 2/10,net 30.
• D) Adopt a new manufacturing process that saves some labor costs but slows down the conversion of raw materials to finished goods from 10 days to 20 days.
• E) Change the credit terms offered to customers from 2/10,net 30 to 1/10,net 60.

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Definitions:

Creditworthiness

The assessment of a borrower's ability to repay debt as agreed, often evaluated through credit scores and financial history.

Credit Policy

A set of guidelines a company uses to determine credit terms for its customers, including payment terms and limits.

Selling Price

The amount of money that a seller charges for a product or service.

Required Rate

The minimum return that investors seek on an investment, taking into account the risk involved.