Jax went to his accountant and learned about cash conversion cycle, defined as that which ______.
A)measures the number of days it takes to collect on accounts receivable
B)measures the average number of days it takes to sell the entire inventory of a company
C)measures the number of days it takes you to pay your bills
D)equals DOI + DSO - DPO

Question

Quizplus · Accepted Answer

The cash conversion cycle is defined as the number of days it takes for a company to convert its investments in inventory and other resources into cash flow from sales. It is calculated using the formula DOI + DSO - DPO, where DOI is the number of days it takes to sell inventory, DSO is the number of days it takes to collect on accounts receivable, and DPO is the number of days it takes to pay bills. Therefore, the correct answer is D.

Jax Went to His Accountant and Learned About Cash Conversion