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Question 350 - CSCP discussion

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Cash-to-cash cycle time is a measure of a firm's:

A.
responsiveness to customer's requirements
Answers
A.
responsiveness to customer's requirements
B.
working capital utilization
Answers
B.
working capital utilization
C.
agility to meet changing customer requirements
Answers
C.
agility to meet changing customer requirements
D.
total supply chain accounts receivable
Answers
D.
total supply chain accounts receivable
Suggested answer: B

Explanation:

Cash-to-cash cycle time is a critical measure of a firm's working capital utilization. It calculates the time taken between outlaying cash for raw materials and receiving cash from product sales. Key points include:

Definition: Cash-to-cash cycle time = Days of Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding.

Working Capital Efficiency: It measures how efficiently a company is managing its working capital. Shorter cycles indicate better utilization of cash resources.

Impact on Liquidity: A shorter cash-to-cash cycle improves liquidity, as the company can quickly turn its inventory into cash.

Operational Performance: This metric reflects overall operational efficiency, including procurement, production, and sales processes.

Coyle, J. J., Langley, C. J., Novack, R. A., & Gibson, B. J. (2016). Supply Chain Management: A Logistics Perspective. Cengage Learning.

Bragg, S. M. (2010). Business Ratios and Formulas: A Comprehensive Guide. Wiley.

asked 16/09/2024
Frans Gafane
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