A firm's cash conversion cycle is equal to its operating cycle minus its ____.

Question

Quizplus · Accepted Answer

The cash conversion cycle (CCC) is the amount of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. It is calculated by subtracting the average payment period (APP) from the sum of the inventory conversion period (ICP) and the average receivables collection period (ARCP): CCC = ICP + ARCP - APP. Therefore, a firm's cash conversion cycle is equal to its operating cycle minus its payables deferral period.

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