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    Effect on cash conversion cycle

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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.

    Please see attached.
    Cash Conversion Cycle. Calculate the accounts receivable period, accounts payable period, inventory period, and cash conversion cycle for the following firm:
    Income statement data:

    Sales 5,000
    Cost of goods sold 4,200
    Beginning of Year End of Year
    Inventory 500 600
    Accounts receivable 100 120
    Account Payable 250 290

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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.

    The cash converson cycle is defined as the length of time for the cash to complete ...

    Solution Summary

    The solution explains the effect on cash conversion cycle of some actions taken by a firm.

    $2.19

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