Desktop Computer Company would like to calculate their cash conversion cycle. What factors are included in computing this metric?Multiple select question.days' sales in cashdays' sales in accounts payable (aka days payables outstanding)days' sales in net incomedays' sales in accounts receivabledays' sales in inventory
Question
Desktop Computer Company would like to calculate their cash conversion cycle. What factors are included in computing this metric?Multiple select question.days' sales in cashdays' sales in accounts payable (aka days payables outstanding)days' sales in net incomedays' sales in accounts receivabledays' sales in inventory
Solution
The cash conversion cycle is calculated using three key components:
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Days' sales in inventory (DSI): This measures the average number of days that a company holds its inventory before selling it.
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Days' sales in accounts receivable (DSAR): This measures the average number of days that a company takes to collect revenue after a sale has been made.
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Days' sales in accounts payable (DSAP), also known as days payables outstanding: This measures the average number of days a company takes to pay its bills from trade creditors, such as suppliers.
So, the factors included in computing the cash conversion cycle are days' sales in inventory, days' sales in accounts receivable, and days' sales in accounts payable. Days' sales in net income and days' sales in cash are not typically included in this calculation.
Similar Questions
Multiple Select QuestionSelect all that applyDesktop Computer Company would like to calculate their cash conversion cycle. What factors are included in computing this metric?Multiple select question.days' sales in accounts payable (aka days payables outstanding)days' sales in net incomedays' sales in inventorydays' sales in cashdays' sales in accounts receivable
Multiple Choice QuestionThe cash conversion cycle is computed as:Multiple choice question.days' sales in accounts receivable plus days' sales in inventory minus days' payable outstandingdays' sales in accounts receivable minus days' sales in inventory minus days' payable outstandingdays' sales in accounts receivable minus days' sales in inventory times days' payable outstandingdays' sales in accounts payable plus days' sales in inventory minus days' payable outstanding
Question 8Tips2 ptsAn analyst gathers the following data for a firm:Sales: $2,500Cost of Goods Sold: $720Interest Paid: $26Net Income: $102Total Assets: $106,500Equity: $56,225Inventory: $180Accounts Receivables: $108Accounts Payables: $142Based on this information, what is the firm's Operating Cash Conversion Cycle (in days)?
Fill in the Blank QuestionFill in the blank question.A company has days' sales in accounts receivable of 40 days; days' sales in inventory of 55 days, and days' payable outstanding of 30 days. The cash conversion cycle is _.
What is the correct formula for Cash Conversion Cycle?
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