Series 79 practice questionmediumFinancial Statement Analysis
A manufacturer has 75 days of inventory, 46 days sales outstanding, and 32 days payables outstanding. What is its cash conversion cycle?
- A153 days
- B61 days
- C78 days
- D89 days✓ Correct answer
Explanation
Why D — 89 days
89 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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