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.
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