What is the length of the cash conversion cycle for a firm with annual sales (all cash) of $280,000, an inventory conversion period of 35 days, and a payables deferral period of 25 days?

Question

Quizplus · Accepted Answer

The cash conversion cycle for this firm can be calculated as:

Inventory conversion period + Receivables collection period - Payables deferral period

Since the annual sales are all cash, there is no receivables collection period, so we can just use the inventory conversion period and the payables deferral period:

35 days - 25 days = 10 days

Therefore, the length of the cash conversion cycle is 10 days.

What Is the Length of the Cash Conversion Cycle for a Firm