medium · Private Equity
A company has a 'Cash Conversion Cycle' (CCC) of 45 days. If it manages to reduce its DSO by 5 days and extend its DPO by 5 days, how is the CCC affected?
- It decreases by 10 days, releasing cash from the balance sheet.
- It decreases by 5 days because only DSO affects the operating cycle.
- It increases by 10 days, requiring more working capital.
- It remains at 45 days as the changes offset each other.
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