A Firm Can Reduce Its Cash Conversion Cycle by

question 13

Multiple Choice

A firm can reduce its cash conversion cycle by

• A) increasing its average age of inventory
• B) increasing its average collection period
• C) decreasing its average payment period
• D) increasing its average payment period

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Definitions:

Types of Accounts

Categories into which financial transactions are grouped in accounting, such as assets, liabilities, equity, revenue, and expenses.

Debit or Credit

Debit or credit are terms used in accounting to indicate whether an entry increases or decreases an account balance, impacting the balance sheet and income statement differently.

Normal Balance

The side (debit or credit) of an account that is typically increased. For asset accounts, it is a debit balance; for liability and equity accounts, it is a credit balance.

Two-column Journal

An accounting ledger that features two columns, typically used for recording debits in one column and credits in the other, to maintain financial transactions.