The Cash Conversion Cycle

question 8

Multiple Choice

The cash conversion cycle

• A) shows how long the firm keeps its inventory before selling it.
• B) begins when the firm invests cash to purchase the raw materials that would be used to produce the goods that the firm manufactures.
• C) begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.
• D) estimates how long it takes on average for the firm to collect its outstanding accounts receivable balance.

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Definitions:

Loss Aversion

A cognitive bias where individuals fear losses more than they value equivalent gains.

Company Retirement

Often related to the benefits or pension schemes planned for employees after they retire from a company, differing from mandatory retirement policies.

Savings Programs

Financial plans or accounts that encourage saving by offering interest or other benefits.

Neoclassical Models

Economic models based on the principles of neoclassical economics that emphasize rational behavior, supply and demand equilibrium, and the efficiency of markets.