Which of the Following Actions Would Be Likely to Shorten

question 45

Multiple Choice

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

• A) change the credit terms offered to customers from 3/10 net 30 to 1/10 net 50.
• B) begin to take cash discounts on inventory purchases; the terms are 2/10 net 30.
• C) 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.
• D) change the credit terms offered to customers from 2/10 net 30 to 1/10 net 60.
• E) adopt a new manufacturing process that speeds up the conversion of raw materials to finished goods from 20 days to 10 days.

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Definitions:

Itemized Deduction

Itemized Deduction involves listing individual tax deductions for which a taxpayer qualifies, as opposed to taking a standard deduction, to reduce taxable income.

Tax Refund

The return of excess taxes paid to a taxpayer by the government, typically after the annual income tax filing.

Cash Receipts

The total amount of money, including cash, checks, and credit card payments, received by a business during a given period.

Disbursements Method

A financial accounting method that records the cash disbursements or payments made by a business.