Question

Which of the following actions should Reece Windows take if it wants to reduce its cash conversion cycle?a. Take steps to reduce the DSO.b. Increase average inventory without increasing sales.c. Sell common stock to retire long-term bonds.d. Start paying its bills sooner, which would reduce the average accounts payable but not affect sales.e. Sell an issue of long-term bonds and use the proceeds to buy back some of its common stock.

Answer 1

Answer: a. Take steps to reduce the DSO

Explanation:

Cash conversion cycle simply measures the length by which there will be deprivation of cash for a firm when the firm increases its investment in its inventory so that customer sales can be expanded

The actions that Reece Windows should take if it wants to reduce its cash conversion cycle is to take steps to reduce the DSO. This will help in reducing cash conversion cycle.