Whaley & Whaley has the following data. What is the firm's cash conversion cycle?

Question

Quizplus · Accepted Answer

Cash conversion cycle = Days inventory outstanding + Days sales outstanding - Days payable outstanding
Days inventory outstanding = (365/COGS)*avg. inventory = (365/1,900)*600 = 115.26 days
Days sales outstanding = (365/revenue)*avg. accounts receivable = (365/7,600)*900 = 42.24 days
Days payable outstanding = (365/purchases)*avg. accounts payable = (365/1,900)*200 = 38.16 days
Therefore, cash conversion cycle = 115.26 + 42.24 - 38.16 = 34.34 days, which rounds to 34 days.

Whaley & Whaley Has the Following Data