Series 79 practice questionmediumFinancial Statement Analysis
A manufacturer has 75 days of inventory, 34 days sales outstanding, and 22 days payables outstanding. What is its cash conversion cycle?
- A131 days
- B87 days✓ Correct answer
- C63 days
- D56 days
Explanation
Why B — 87 days
87 days Cash conversion cycle equals days inventory outstanding plus DSO minus DPO. The metric shows how long cash is tied up in the operating cycle before it returns to the business.
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