Computing the Cash Conversion Cycle
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An analyst has gathered the following data about a company:
Average receivables collection period of 37 days.
Average payables payment period of 30 days.
Average inventory processing period of 46 days.
What is their cash conversion cycle?
A) 113 days.
B) 53 days.
C) 45 days.
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Solution Summary
The solution computes the cash conversion cycle.
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The cash conversion cycle, sometimes called the operating cycle, is the time from when the company lays out cash for goods (as opposed to when it buys them) until when it collects cash from selling the goods (as opposed to when it sells them). The cash conversion cycle consists of ...
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