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NEW QUESTION: 1
The cash conversion cycle equals:
A. receivables days - payables payment period + inventory processing days.
B. receivables days + inventory processing days + payables payment period.
C. receivables days - inventory processing days - payables payment period.
D. receivables days - inventory processing days + payables payment period.
The cash conversion cycle is a measure of how long the cash is tied up in short term loans and credits.
These short-term financing items include receivables, inventory and accounts payable. The first two of these represent sources of cash while accounts payable represent a future drain of cash. So the cash conversion cycle is defined as: CCC = (Average receivables collection period) plus (Average inventory processing time) minus (Average payables payment period). A low cash conversion cycle could indicate that you are either collecting your debts or churning inventory faster or you are paying your bills slower.
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