Certified Supply Chain Professional (CSCP) Practice Exam

What impact does a faster cash-to-cash cycle time have on a company?

1. Indicates increased liability management

2. Reflects a healthier company financial status

3. Suggests a decline in inventory management

4. Points to lower sales performance

The correct answer is: Reflects a healthier company financial status

A faster cash-to-cash cycle time is an indicator that a company is able to convert its investments in inventory and other resources into cash more quickly. This rapid turnaround suggests improved efficiency in managing inventory, collecting receivables, and making timely payments to suppliers. As the cash flows more swiftly through the cycle, it means that the company has better liquidity, which is vital for its overall financial health. Increased liquidity allows a company to take on investment opportunities, conduct operations without cash flow constraints, and react more effectively to market changes. Therefore, a faster cash-to-cash cycle reflects a stronger financial status, as the company is in a better position to meet its obligations and invest in growth. While other choices address different aspects of financial performance and operations, they do not relate directly to the efficiency and liquidity implied by an accelerated cash-to-cash cycle.