Answer to Question #125726 in Economics for Fikile Arrive

Question

If Aztec could shorten its CCC by 5 days, would it be best to reduce the inventory holding period, reduce the receivable collection period, or extend the accounts payable period? Explain why.

Answer 1

The cash conversion cycle (CCC) is a formula in management accounting that measures how efficiently a company's managers are managing its working capital.

It would be best to extend the accounts payable period, because the longer you can wait to pay for your inventory - the longer your accounts payable period, in other words - the shorter the cycle.