Desai Inc.has the following data,in thousands.Assuming a 365-day year,what is the firm's cash conversion cycle?
A)28 days
B)32 days
C)35 days
D)39 days
E)43 days

Question

Desai Inc.has the following data,in thousands.Assuming a 365-day year,what is the firm's cash conversion cycle? 
A)28 days 
B)32 days 
C)35 days 
D)39 days 
E)43 days

Quizplus · Accepted Answer

Cash conversion cycle = days inventory outstanding + days sales outstanding - days payable outstanding 
Days inventory outstanding = average inventory / (cost of goods sold / 365) = ($2,400 / ($21,600 / 365)) = 32.22 days 
Days sales outstanding = accounts receivable / (annual sales / 365) = ($1,080 / ($14,400 / 365)) = 27.19 days 
Days payable outstanding = accounts payable / (cost of goods sold / 365) = ($1,260 / ($21,600 / 365)) = 21.94 days

Cash conversion cycle = 32.22 + 27.19 - 21.94 = 37.47 days, which rounds up to 39 days.

Desai IncHas the Following Data,in Thousands