What can be affect to the company, according to the cash cycle going from year 1 to 4? It can be positive trend or negative trend? explain why?
year 4 | 3 | 2 | 1 | |||||
Cash cycle | 1.17 | 5.74 | 10.5 | 11.6 |
Correct Answer:
It is positive trend
Explanation:
Cash cycle is a measurement of the company’s working capital efficiency. It shows the number of days required by a company in generating the revenue from its assets.
Since the cash cycle shows a declining trend from year 1 to year 4, it can be said that the company is taking less time every year in generating cash from its assets therefore it is a positive trend of cash cycle.
End of answer.
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