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    Cash Conversion Cycle: what effect for events?

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    Cash Conversion Cycle. What effect will the following events have on the cash conversion cycle?

    a. Higher financing rates induce the firm to reduce its level of inventory.
    b. The firm obtains a new line of credit that enables it to avoid stretching payables to its suppliers.
    c. The firm factors its accounts receivable.
    d. A recession occurs, and the firm's customers increasingly stretch their payables.

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    Solution Preview

    CCC = Accounts receivable turnover in days + Inventory turnover in days - Accounts payable turnover in days

    (a) ...

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