The cash-to-cash cycle time is a financial metric that measures the time it takes for a company to convert its cash outflows into cash inflows. The cash-to-cash cycle time is calculated by adding the days of inventory outstanding (DIO), the days of sales outstanding (DSO), and the days of payablesoutstanding (DPO), and then subtracting the days of payables deferred (DPD). The cash-to-cash cycle time can be shortened by reducing any of the components, except for DPD, which should be increased. Reducing which measure by 10% would contribute most to shortening the cash-to-cash cycle time depends on the relative values of each component. However, given the information below, reducing accounts receivable by 10% would have the greatest impact.

The current cash-to-cash cycle time is:

Cash-to-cash cycle time = DIO + DSO + DPO - DPD = 60 + 90 + 30 - 15 = 165 days

If accounts receivable is reduced by 10%, then DSO becomes 81 days (90 x 0.9). The new cash-to-cash cycle time is:

Cash-to-cash cycle time = DIO + DSO + DPO - DPD = 60 + 81 + 30 - 15 = 156 days

The difference is 9 days, which is the largest reduction among all the measures.

If inventory value is reduced by 10%, then DIO becomes 54 days (60 x 0.9). The new cash-to-cash cycle time is:

Cash-to-cash cycle time = DIO + DSO + DPO - DPD = 54 + 90 + 30 - 15 = 159 days

The difference is 6 days, which is smaller than reducing accounts receivable.

If accounts payable is reduced by 10%, then DPO becomes 27 days (30 x 0.9). The new cash-to-cash cycle time is:

Cash-to-cash cycle time = DIO + DSO + DPO - DPD = 60 + 90 + 27 - 15 = 162 days

The difference is 3 days, which is smaller than reducing accounts receivable and inventory value.

If cost of capital is reduced by 10%, then it has no direct effect on the cash-to-cash cycle time, as it is not a component of the formula. However, it may affect the profitability and liquidity of the company indirectly.

Therefore, reducing accounts receivable by 10% would contribute most to shortening the cash-to-cash cycle time, given the information below.

References: CPIM Exam Content Manual Version 7.0, Domain 4: Plan and Manage Supply, Section 4.2: Implement Supply Plans, Subsection 4.2.3: Describe how to implement financial management techniques (page 40).