BP Has a Cash Conversion Cycle of 80 Days, an Average

question 62

Multiple Choice

BP has a cash conversion cycle of 80 days, an average collection period of 25 days, and an average age of inventory of 70 days. Based on this information, BPs operating cycle is ________ days.

• A) 95
• B) 85
• C) 75
• D) 65

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Definitions:

Reinvestment Assumption

The presumption that cash flows received from an investment will be reinvested at a consistent rate over the life of the investment.

Net Present Value

A financial measure that calculates the present value of net cash flows (inflows minus outflows) from an investment, discounting future cash flows to the present.

Internal Rate of Return

A metric used in financial analysis to estimate the profitability of potential investments, calculated as the rate that makes the net present value of cash flows equal to zero.

Capital Expenditure Decision Process

The process of making decisions related to the acquisition of capital assets, taking into consideration their costs, benefits, and risks.