Shulman Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle?

Question

Quizplus · Accepted Answer

The formula for cash conversion cycle is (Days Inventory Outstanding + Days Sales Outstanding) - Days Payable Outstanding. 
Days Inventory Outstanding = 60 days
Days Sales Outstanding = 52 days
Days Payable Outstanding = 27 days
(60 + 52) - 27 = 85 - 27 = 58 days
Since the cash conversion cycle is in days, we need to divide by 365 to get the answer in years: 
58/365 = 0.16 years = 39 days (rounded to the nearest day). Therefore, the best choice is D (39 days).