In Order to Achieve a Negative Cash Conversion Cycle a Firm

question 8

Multiple Choice

In order to achieve a negative cash conversion cycle a firm would want to:

• A) increase its account payable period and its inventory turns.
• B) decrease its account payable period and its inventory turns.
• C) increase its account payable terms and decrease its inventory turns.
• D) decrease its account payable terms and increase its inventory turns.
• E) analyze systems and stop whatever processes are causing this, since a negative cash conversion cycle is associated with losses, not profits.

---

Definitions:

Scarcity

A fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Decision-making Processes

The steps involved in choosing among alternatives to address a problem or capitalize on an opportunity.

Capitalism

An economic system characterized by private or corporate ownership of capital goods, investments dictated by private decision, and prices, production, and the distribution of goods determined mainly by competition in a free market.

Marginal Cost

The cost of producing one additional unit of a good or service, which can change depending on the level of production.