What strategies can a firm use to optimize its cash cycle?© BrainMass Inc. brainmass.com March 4, 2021, 11:58 pm ad1c9bdddf
The cash cycle is the amount of time between the firm's outlay of funds for inventory (or services, if it is a service company) and the collection of funds from customers. By optimizing the cash cycle, the firm has more cash available to invest, and for a longer period of time, thus maximizing its returns.
The best purchasing strategy to minimize the amount of cash tied up in inventory is to adopt a "just-in-time inventory" (JIT) strategy. ...
This solution dissects the elements of the cash conversion cycle and offers suggestions to optimize its cash collections (or to minimize its cash losses) regarding each element.