Cash Conversion Cycle = Operating Cycle - Accounts Payable Deferral Period.

Question

Quizplus · Accepted Answer

This is the correct formula for calculating the cash conversion cycle. The operating cycle represents the time it takes a company to convert its resources into cash, and the accounts payable deferral period represents the time it takes the company to pay its suppliers. By subtracting the accounts payable deferral period from the operating cycle, we get the cash conversion cycle, which represents the time it takes a company to convert its resources into cash, minus the time it takes to pay its suppliers.