Fill in the Blank QuestionFill in the blank question.A company has days' sales in accounts receivable of 25 days; days' sales in inventory of 45 days, and days' payable outstanding of 50 days. The cash conversion cycle is _.
Question
Fill in the Blank QuestionFill in the blank question.A company has days' sales in accounts receivable of 25 days; days' sales in inventory of 45 days, and days' payable outstanding of 50 days. The cash conversion cycle is _.
Solution
The cash conversion cycle is calculated using the formula:
Cash Conversion Cycle = Days' Sales in Inventory + Days' Sales in Accounts Receivable - Days' Payable Outstanding
Given the values in the question:
Cash Conversion Cycle = 45 days (Days' Sales in Inventory) + 25 days (Days' Sales in Accounts Receivable) - 50 days (Days' Payable Outstanding)
So, the cash conversion cycle is 20 days.
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