Series 79 practice questionmediumFinancial Statement Analysis
A manufacturer has 75 days of inventory, 34 days sales outstanding, and 27 days payables outstanding. What is its cash conversion cycle?
- A136 days
- B82 days✓ Correct answer
- C68 days
- D61 days
Explanation
Why B — 82 days
82 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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