A firm's inventory conversion period is 45 days, its receivables collection period is 30 days, and its payables payment period is 20 days. What is its cash conversion cycle?
Correct answer: B. 55 days
- A. 35 days
- B. 55 days
- C. 75 days
- D. 95 days
Explanation
The cash conversion cycle equals inventory days plus receivable days minus payable days. Therefore, 45 plus 30 minus 20 equals 55 days.
Last updated
About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
Practise Business Finance
80 free Business Finance MCQs from Management Sciences, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Management Sciences questions like this
Management Sciences is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
Related questions
A bond with a face value of Rs. 1,000 pays annual interest of Rs. 80 and currently sells for Rs. 800. What is its approximate current yield?
A business has annual fixed costs of Rs. 300,000, a selling price of Rs. 50 per unit and variable cost of Rs. 30 per unit. What is its break-even output?
A business has sales of Rs. 1,000,000 and variable costs of Rs. 600,000. What is its contribution margin ratio?
A business has total assets of Rs. 2,400,000 and total liabilities of Rs. 1,500,000. What is the value of its owners' equity?
A company deposits Rs. 100,000 at the end of each year for three years in an account earning 10% annually. What is the approximate value of these deposits at the end of the third year?