Question

Float is important in the cash conversion cycle of a firm because​ ________. A. its presence reduces the investment that a firm must make in its cash conversion cycle B. its presence reduces a​ firm's average payment period C. its presence reduces a​ firm's average collection period D. its presence lengthens both a​ firm's average collection period and its average payment period

Answer 1

Answer:

Option D. Its presence lengthens both a firm's average collection period and its average payment period

Explanation:

The increase in the float, increases the investment in the working capital so the Option A is incorrect

The reason is that it is the time period from the time the cash was deposited in the company's account to the time its was credited due to the payment to the vendors. If the floating time is increased then the collection period and payment period are increased which is the option D and is totally opposite to option B and C.