Which of the following is NOT true of the cash conversion cycle?
A)It is the net period from the start of cash outflow for producing a product or service until the associated cash inflow materializes from the sale of that product or service.
B)Cash Conversion Cycle = Production Cycle + Collection Cycle - Payment Cycle
C)Cash Conversion Cycle = Production Cycle + Collection Cycle + Payment Cycle
D)The cash conversion cycle essentially measures how quickly a company can convert its products or services into cash.

Question

Quizplus · Accepted Answer

The cash conversion cycle is calculated by subtracting the payment cycle (time to pay suppliers) from the sum of the production cycle (time to produce and sell the product) and collection cycle (time to collect payment from customers). Therefore, option C is incorrect as it adds the payment cycle instead of subtracting it.

Which of the Following Is NOT True of the Cash