Which of the Following Actions Should Reece Windows Take If

question 104

Multiple Choice

Which of the following actions should Reece Windows take if it wants to reduce its cash conversion cycle?

• A) Take steps to reduce the DSO.
• B) Start paying its bills sooner, which would reduce the average accounts payable but not affect sales.
• C) Sell common stock to retire long-term bonds.
• D) Sell an issue of long-term bonds and use the proceeds to buy back some of its common stock.
• E) Increase average inventory without increasing sales.

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Definitions:

Significant Participation Activities

Activities involving substantial time participation, typically more than 100 hours annually, that can impact taxation, especially in passive income situations.

Adjusted Gross Income

An individual's total gross income minus specific deductions, used to determine taxable income and eligibility for certain tax benefits.

At-Risk Amount

The maximum amount of money an investor stands to lose in an investment, which limits loss deduction claims for tax purposes.

Passive Loss Rules

are tax rules that limit the ability to deduct losses from passive activities unless the taxpayer materially participates in the activity.