What Is the Cash Conversion Cycle for a Firm with $3

question 89

Multiple Choice

What is the cash conversion cycle for a firm with $3 million average inventories, $1.5 million average accounts payable, a receivables period of 45 days, and an annual cost of goods sold of $18 million?

• A)14.59 days
• B)46.25 days
• C)75.41 days
• D)136.25 days

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Definitions:

Implicit Costs

The opportunity costs that are not directly paid for in dollars but represent the loss of benefits from the next best alternative when resources are not used in their best alternative use.

Mental Accounting

A concept in behavioral economics where individuals categorize and treat money differently depending on its source, intended use, or other psychological factors.

Irrational Behavior

Actions or decisions that do not logically follow from a rational analysis of the situation.

Misperception

A misunderstanding or incorrect interpretation of a situation, often leading to erroneous decisions or beliefs.