The difference between the number of days resources are tied up in the operating cycle and the number of days the firm can use spontaneous financing before payment is made is the
A) cash conversion cycle.
B) average payment period.
C) average collection period.
D) average age of inventory.

Question

Quizplus · Accepted Answer

The difference between the number of days resources are tied up in the operating cycle (average age of inventory plus average collection period) and the number of days the firm can use spontaneous financing before payment is made (average payment period) is known as the cash conversion cycle.

The Difference Between the Number of Days Resources Are Tied