Question

Discuss the benefits the company stands to gain by accurately determining the cash conversion cycle (CCC).

Discuss how an increase in the DPO will impact the cash conversion cycle?

Answer 1

1. Benefits with the company will gain by accurately managing the cash conversion cycle would be as follows -

A.it would help the company in management of the adequate liquidity in the short term as well as in the long term

B. It will also be helpful for the company in managing its debt repayment obligation

C. It will also be helpful for the company to avoid the solvency and liquidation risk.

D. It will be helpful for the company in order to to effectively manage its Assets and allocate it in a better manner.

increase in days payment outstanding will be helpful for the company in following ways-

A. It would be helpful in company by lagging the payments to its creditor

B. It will also be helpful for the company to gain time value of money on its payments and allocate it into the better resources

C.it will be helpful for the company in the management of the liquidity and increase in the cash value of company and working capital of company as well.

D. It will be helpful in increasing the cash conversion cycle of the company.