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The Cash Conversion Cycle Is the Sum of Average Age

question 83

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The cash conversion cycle is the sum of average age of the inventory and average collection period minus average payment period.


Definitions:

Cash Inflows

Money received by a business or organization through its activities, such as sales revenue, investment income, or financing.

Profitability Index

A ratio that calculates the relative profitability of an investment by dividing the present value of future expected cash flows by the initial investment cost.

Initial Investment

The amount of money used to start a project, investment, or business.

Cash Inflows

Funds entering a business from various sources, including sales, investments, and financing activities, critical for maintaining liquidity.

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