Float Is Important in the Cash Conversion Cycle of a Firm

question 233

Multiple Choice

Float is important in the cash conversion cycle of a firm because ________.

• A) its presence reduces a firm's average collection period
• B) its presence reduces a firm's average payment period
• C) its presence lengthens both a firm's average collection period and its average payment period
• D) its presence reduces the investment that a firm must make in its cash conversion cycle

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Definitions:

Elasticity

A measure in economics to show how the quantity demanded or supplied of a good or service responds to a change in price.

Price Ceiling

A legally imposed maximum price on a good or service, intended to keep prices low for buyers.

Shortage/Surplus

A market condition where the quantity demanded is greater than the quantity supplied (shortage) or the quantity supplied is greater than the quantity demanded (surplus).

Price Floor

A government or group-imposed limit that prevents prices of goods or services from falling below a certain level.