A firm purchased raw materials on account and paid for them within 30 days. The raw materials were used in manufacturing a finished good sold on account 100 days after the raw materials were purchased. The customer paid for the finished good 60 days later. The firm's cash conversion cycle is _ days.

Question

Quizplus · Accepted Answer

The cash conversion cycle is calculated as the sum of the inventory period (100 days from purchase to sale) and the receivables period (60 days from sale to cash receipt), minus the payables period (30 days from purchase to payment), which equals 130 days (100 + 60 - 30 = 130).

A Firm Purchased Raw Materials on Account and Paid for Them