The cash conversion cycle is the length of time from
A) the payment of accrued wages to manufacture a product until the sale of that product.
B) the payment of accrued wages to manufacture a product until the collection of accounts receivable associated with the sale of that product.
C) the payment for the purchase of raw materials to manufacture a product until the sale of that product.
D) the payment for the purchase of raw materials to manufacture a product until the collection of accounts receivable associated with the sale of that product.

Question

Quizplus · Accepted Answer

The cash conversion cycle measures the time it takes a company to convert its investments in inventory and other resources into cash collections from customers. Therefore, the correct choice is D because it represents the time interval between paying for raw materials and receiving payment for the sale of the finished product, which encompasses most of the working capital cycle. The other choices may be related to the working capital cycle, but they do not accurately describe the cash conversion cycle.

The Cash Conversion Cycle Is the Length of Time from