If a Firm Takes Actions That Reduce Its Days Sales

question 116

True/False

If a firm takes actions that reduce its days sales outstanding (DSO), then, other things held constant, this will lengthen its cash conversion cycle (CCC).

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Definitions:

Actual Costs

The genuine costs incurred for materials, labor, and overhead in the production process or in providing a service.

Fixed Manufacturing Overhead

Costs that remain constant in total regardless of the level of production, such as salaries and rent for factory buildings.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or services, calculated before the accounting period begins based on estimated costs.

Fixed Manufacturing Overhead

Costs that do not vary with the level of production or sales, including expenses like rent, salaries, and utilities.