Which of the following would result in a negative cash conversion cycle
A negative cash conversion cycle is not possible. O B. Average collection period 60 days, inventory conversion period 30 days, payables deferral period 7 days.
What causes a negative cash conversion cycle?
A negative cash conversion cycle means that inventory is sold before you have to pay for it. Or, in other words, your vendors are financing your business operations. A negative cash conversion cycle is a desirable situation for many businesses.
Which of the following would decrease the cash conversion cycle?
A higher, or quicker, inventory turnover decreases the cash conversion cycle. Thus, a better inventory turnover is a positive for the CCC and a company's overall efficiency.
What is a negative cash conversion cycle quizlet?
• negative cash conversion means firm receives money from customers before paying suppliers (desirable) Cash conversion cycle formula. Operating cycle - days payable out (dpo) Days payable outstanding. Length it takes to pay suppliers, (longer preferred, firm holds cash, more investment potential)
Can a company have a negative cash conversion cycle?
A positive cash conversion cycle, even if on the lower end relative to comparable companies, is still a “use” of cash at the end of the day. While an uncommon occurrence, certain companies can have negative CCCs, which means the net impact is a “source” of cash.
What does a high cash conversion cycle indicate?
High Cash Conversion Cycle This indicates that the company is inefficient in managing its cash. The conversion cycle can be longer if the Receivable Days and Inventory Days are relatively higher than the Payable Days. Such a high conversion cycle will lead to lower liquidity since it is taking longer period to receive the cash.
What is Walmart’s cash conversion cycle?
As clearly evident, Walmart has a very low Cash Conversion Cycle of only 2 days. This means that in the case of Walmart, the investment in Inventory and Receivables after factoring the time taken for paying Accounts payable is returned back to the company in only 2 Days
Transcribed image text: Which of the following would result in a negative cash conversion cycle? O A. A negative cash conversion cycle is not possible. O B. Average collection period 60 days, inventory conversion period 30 days, payables deferral period 7 days. O C. Average collection period 7 days, inventory conversion period 30 days, payables deferral period 60 days. O D. Average collection period 7 days, inventory conversion period 30 days, payables deferral period 30 days.
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