Marshall Manufacturing has an ACP of 60 days, an inventory turnover of 6, and turns its payables over once a month. How long is Marshall's cash conversion cycle? (Assume a 360-day year)
A)30 days
B)60 days
C)90 days
D)120 days

Question

Quizplus · Accepted Answer

Cash conversion cycle (CCC) = ACP + Inventory turnover days - Payable turnover days
ACP = 60 days
Inventory turnover = 6 (i.e. 360/6 = 60 days)
Payable turnover = 12 (i.e. 360/12 = 30 days)

Thus, CCC = 60 + 60 - 30 = 90 days. Therefore, option C is the correct answer.

Marshall Manufacturing Has an ACP of 60 Days, an Inventory