Question

question 3
a drop in the cash conversion cycle most likely implies;
decreased liquidity
increased funds are tied up in current operating assets
increased liquidity
none of the above is consistent with a drop in the cash conversion cycle

Explanation:

The cash conversion cycle (CCC) measures how long a company takes to convert inventory and other resources into cash. A shorter (dropped) CCC means the company is converting resources to cash faster, which improves its ability to meet short - term obligations, i.e., increases liquidity. "Decreased liquidity" is wrong as a shorter CCC should improve liquidity. "Increased funds tied up in current operating assets" is wrong because a shorter CCC means less funds are tied up (since conversion to cash is faster).

Answer:

C. Increased liquidity