A Firm Can Reduce the Cash Conversion Cycle by Selling

question 104

True/False

A firm can reduce the cash conversion cycle by selling fewer goods on credit.

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Definitions:

Loan Made

Money that is lent to another party in exchange for future repayment of the loan value amount, plus interest.

Indirect Method

An accounting technique used to prepare the cash flow statement, where increases in non-cash current assets are subtracted from, and increases in current liabilities are added to, net income to arrive at net cash flow from operating activities.

Net Cash

The difference between all cash inflows and outflows within a given period, often used to assess financial health.

Operating Activities

Day-to-day actions and transactions that are directly related to running a business, such as buying, selling, and production.