A Firm with a Cash Conversion Cycle of 175 Days

question 99

Multiple Choice

A firm with a cash conversion cycle of 175 days can stretch its average payment period from 30 days to 45 days. This will result in a/an ________.

• A) decrease of 30 days in the cash conversion cycle
• B) increase of 15 days in the cash conversion cycle
• C) decrease of 15 days in the cash conversion cycle
• D) increase of 30 days in the cash conversion cycle

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Definitions:

Illusory Promise

A situation in which a party appears to commit to something but really has not committed to anything. It is not a promise and thus not consideration.

Valid Consideration

Valid consideration in a contract represents something of value that is given by all parties involved, serving as the reason or inducement to enter into the contract.

Adequacy Of Consideration

Refers to the fairness of the bargain in a contract, ensuring that what is exchanged holds reasonable value.

Detriment

A loss or harm suffered as a result of an action or decision.