Question

The cash conversion cycle (CCC) combines three factors: The inventory conversion period, the average collection period, and the payables deferral period, and its purpose is to show how long a firm must finance its working capital. Other things held constant, the shorter the CCC, the more effective the firm's working capital management.

1. true
2. false

Answer 1

Answer:

1. True

Explanation:

The shorter CCC will make the firm's working capital management more effective. As company recovers the cash early and invest it again to make more profit out of the business. Additional cash enables the company to purchase more and pay its outstanding debts. Company is also required less amount to invest in the working capital in case of shorter CCC.