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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

Define the cash conversion cycle (CCC) and explain why, holding other things constant, a firm's profitability would increase if it lowered its CCC.

Summary Introduction

To explain: The cash conversion cycle, and its relationship with firm’s profitability.

Introduction:

Cash Conversion Cycle:

It indicates that duration in which funds keep involved from the production process to collection of cash through the sale process.

Explanation

Cash conversion cycle:

The cash conversion cycle refers to that time period, which starts from the production of the products to sell of the products and lasts until the time the cash received from customers.

Effect of cash conversion cycle on firm’s profitability:

The firm’s profitability will increase with its lowered cash conversion cycle due to decrease in funds cost...

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