An analyst has found that a firm’s cash conversion
An analyst has found that a firm’s cash conversion cycle has decreased significantly over the past year and suspects accounting manipulation of cash flows. The least likely way for the company to have decreased its cash conversion cycle is by:
A.financing payables.
B.stretching out payables.
C.securitization of receivables.
参考解答
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2024-11-08 13:56:35
Ans:A.
Cash conversion cycle
= Days of inventory on hand (DOH) + Days Sales Outstanding (DSO) – days in payables.
Financing payables reduces accounts payables, decreases days in payables, and lengthens the cash conversion cycle.
B is incorrect. Stretching out payables increases accounts payable, increases days’ payable, and decreases the cash conversion cycle.
C is incorrect. Securitization of receivables decreases receivables and days’ receivables, which decreases the cash conversion cycle.
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