i) Which of the proposed changes is most likely to result in a decrease in the operating cycle? Explain your answer in a single sentence ii) Which of the proposed changes is least likely to result in a change in the cash conversion cycle (also known as the net operating cycle)? Explain your answer in a single sentence
Sphinx plc manufacturers a variety of electronic devices, including mobile phones, laptops, televisions and audio equipment. Sales are made directly to customers via Sphinx’s website. However, the majority of sales are through the retail networks of various third-party distributors, who operate both online and through high street stores.
Sphinx is considering a number of changes to its operating model:
- Increasing sales volume by 30%, via a major marketing campaign, with no change to product lines or mix
- Increasing sales volume by 30%, through introduction of a variety of new product lines, that will be sold along with existing products
- Taking advantage of an early payment discount offered by its major raw material supplier request
i) Which of the proposed changes is most likely to result in a decrease in the operating cycle? Explain your answer in a single sentence
ii) Which of the proposed changes is least likely to result in a change in the cash conversion cycle (also known as the net operating cycle)? Explain your answer in a single sentence
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