A firm has an inventory conversion period of 39 days, a payables deferral period of 46 days, and a receivables collection period of 36 days. How long does the firm typically have funds tied up in current assets other than cash?

Question

Quizplus · Accepted Answer

The firm's cash conversion cycle (CCC) is calculated as the inventory conversion period plus the receivables collection period minus the payables deferral period. Thus, CCC = 39 days + 36 days - 46 days = 29 days. This represents the number of days funds are tied up in current assets other than cash.

A Firm Has an Inventory Conversion Period of 39 Days