Cash Conversion Cycle: Your Boss Asks You to Compute the Company's

question 40

Multiple Choice

Cash conversion cycle: Your boss asks you to compute the company's cash conversion cycle. Looking at the financial statements, you see that the average inventory for the year was $126,300, accounts receivable were $97,900, and accounts payable were at $115,100. You also see that the company had sales of $324,000 and that cost of goods sold was $282,000. What is your firm's cash conversion cycle? Round to the nearest day.

• A) 119 days
• B) 34 days
• C) 57 days
• D) 125 days

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Definitions:

Inventory Management

The practice of overseeing and controlling the ordering, storage, and use of components that a company uses in the production of the items it sells.

Supply Chain Management

The oversight of materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer to consumer.

Work In Process

Inventory or products that are in the production process but are not yet completed, representing a stage between raw materials and finished goods.

Just-In-Time (JIT) Scheduling

Minimises inventory by routing materials to workstations ‘just in time’ to be used.