How is the cash conversion cycle calculated?
A)Average collection period + days inventory held + Days payable outstanding.
B)Average collection period - days inventory held + Days payable outstanding.
C)Average collection period - days inventory held - Days payable outstanding.
D)Average collection period + days inventory held - Days payable outstanding.

Question

Quizplus · Accepted Answer

The cash conversion cycle is calculated as the sum of the average collection period and days inventory held, minus the days payable outstanding. This measures the time between when a company pays for its inventory and when it receives cash from its sales, effectively showing how efficiently a company manages its working capital.

How Is the Cash Conversion Cycle Calculated