Which of the following measures the average time it takes a firm to complete its operating cycle after deducting the days supported by trade credit and delayed payroll financing?
A)sale-to-cash conversion period
B)inventory-to-sale conversion period
C)purchase-to-payment conversion period
D)cash conversion cycle

Question

Quizplus · Accepted Answer

The cash conversion cycle measures the average time it takes for a firm to convert its inventory into cash, and then pay off its accounts payable. It considers both the inventory-to-sale conversion period and the purchase-to-payment conversion period, but also deducts the days supported by trade credit and delayed payroll financing. Therefore, choice D is the correct answer.

Which of the Following Measures the Average Time It Takes