If a firm has a cash cycle of 20 days and an operating cycle of 60 days, what is its payables turnover?
A) 8.06
B) 9.13
C) 20.00
D) 40.00

Question

Quizplus · Accepted Answer

The payables turnover is calculated as the operating cycle minus the cash cycle, which gives the payables deferral period. In this case, it's 60 days (operating cycle) - 20 days (cash cycle) = 40 days. To find the payables turnover, you divide 365 days by the payables deferral period. Thus, 365 / 40 = 9.125, which rounds to 9.13.

If a Firm Has a Cash Cycle of 20 Days