In Order to Achieve a Negative Cash Conversion Cycle a Firm

question 8

Multiple Choice

In order to achieve a negative cash conversion cycle a firm would want to:

• A) increase its account payable period and its inventory turns.
• B) decrease its account payable period and its inventory turns.
• C) increase its account payable terms and decrease its inventory turns.
• D) decrease its account payable terms and increase its inventory turns.
• E) analyze systems and stop whatever processes are causing this, since a negative cash conversion cycle is associated with losses, not profits.

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Definitions:

Discretionary Policy

Discretionary policy involves government and central banking measures that are actively implemented to influence economic conditions, such as adjusting taxes or changing interest rates.

Active Monetary Policy

Active monetary policy involves deliberate actions by a central bank to influence the economy's monetary supply and interest rates, aiming to achieve specific macroeconomic objectives.

Passive Approach

A strategy characterized by minimal or no intervention, often used in investment or management contexts.

Expansionary Gap

A situation where actual output in an economy exceeds the potential output, typically leading to inflation.