Question 855 cash cycle, accounting ratio
The below diagram shows a firm’s cash cycle.
Which of the following statements about companies’ cash cycle is NOT correct?
(a) The cash cycle is measured in days.
(b) The lower the cash cycle, the better.
(c) The cash cycle represents the time that money must be invested or ‘tied up’ in inventory.
(d) Companies should avoid negative cash cycles.
(e) The cash cycle is the time between the inventory payment date to the supplier and cash receipt date from the customer.
Copyright © 2014 Keith Woodward