- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 4. Working Capital and Liquidity
- Subject 1. Cash Conversion Cycle
CFA Practice Question
If all other factors are equal, which one of the following actions is most apt to increase the cash balance of a firm?
A. Increasing the accounts payable turnover
B. Increasing the accounts receivable period
C. Reducing the length of cash cycle
Explanation: The other choices will increase the length of cash cycle and lower the cash balance.
User Contributed Comments 3
| User | Comment |
|---|---|
| soarer1 | can someone explain? |
| migena | cash conversion cycle => preferable as short as possible hence CCC = 365/AR turnover + 365/Inv turnover - 365/AP turnover AR turnover = Sales/avg AR Inv turnover = COGS/avg Inv AP turnover = COGS/avg AP |
| boddunah | migena, very nice.succinct. |