A firm's cash conversion cycle is equal to its operating cycle minus its ____.
A) inventory conversion period
B) receivables conversion period
C) payables deferral period
D) None of these are correct

Question

Quizplus · Accepted Answer

The cash conversion cycle is a measure of the time it takes for a firm to convert its investments in inventory and accounts receivable into cash. It is equal to the operating cycle (the time it takes for a company to purchase inventory, sell it and receive payment from customers) minus the payables deferral period (the time it takes a company to pay its suppliers). Therefore, the correct answer is C, payables deferral period.

A Firm's Cash Conversion Cycle Is Equal to Its Operating