Use the table for the question(s)below.
Luther Enterprises Ltd had sales of $850 million and a cost of goods sold of $500 million in 2016.
A simplified balance sheet for the firm appears below:
-Luther's 'cash conversion cycle' is closest to:
A)71 days.
B)64 days.
C)66 days.
D)129 days.

Question

Use the table for the question(s)below.
Luther Enterprises Ltd had sales of $850 million and a cost of goods sold of $500 million in 2016.
A simplified balance sheet for the firm appears below:  
-Luther's 'cash conversion cycle' is closest to:
A)71 days. 
B)64 days. 
C)66 days. 
D)129 days.

Quizplus · Accepted Answer

The cash conversion cycle (CCC) measures how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. It's calculated as the sum of days inventory outstanding (DIO), days sales outstanding (DSO), and subtracting days payable outstanding (DPO). Without specific values for DIO, DSO, and DPO provided in the question, the correct answer cannot be determined through calculation. However, given the options, the choice closest to a typical CCC for many businesses could be 64 days, as CCCs can vary widely across industries but often fall within a one to two-month range for efficiently managed companies.

Use the Table for the Question(s)below