True. The longer its customers normally hold inventory, the longer the credit period supplier firms normally offer. Still, suppliers have some flexibility in the credit terms they offer. If a supplier lengthens the credit period offered, this will shorten the customer's cash conversion cycle but lengthen the supplier firm's own CCC. When studying the cash conversion cycle, you are able to see how effective a company's management team is and how the company is doing overall. These metrics are important to know so a company knows how much cash they need to have on hand and where they need to shift money around to within their different accounts.
