A Firm Has a Cash Conversion Cycle of 80 Days

question 205

Multiple Choice

A firm has a cash conversion cycle of 80 days, an average collection period of 25 days, and an average age of inventory of 70 days. Its operating cycle is ________ days.

• A) 95
• B) 105
• C) 60
• D) 130

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Definitions:

Liquidation Purposes

The process of converting assets into cash or cash equivalents by selling them in the event that a business is closing or reorganizing

Sale of Assets

The process of disposing of business assets, either tangible or intangible, in exchange for cash or other compensation.

Sheriff's Sale

A public auction of property repossessed by the government as a result of the owner's failure to comply with legal obligations, such as unpaid taxes or mortgage.

Capital Balances

The amount of money that owners have invested in a business, typically shown in the equity section of the balance sheet.