Which of the following represents the correct formula for calculating the cash conversion cycle?
A)Days' sales in inventory − Days' payable outstanding.
B)Days' sales in cost of goods sold + Days' sales in inventory − Days' payable outstanding.
C)Days' sales in accounts receivable + Days' sales in inventory − Days' payable outstanding.
D)Days' sales in cost of goods sold − Days' payable outstanding.
E)Days' sales in accounts receivable − Days' payable outstanding.

Question

Quizplus · Accepted Answer

The correct formula for calculating the cash conversion cycle is Days' sales in accounts receivable + Days' sales in inventory − Days' payable outstanding. This formula takes into account the amount of time it takes a company to collect on its accounts receivable, the amount of time it takes to sell inventory, and the amount of time the company takes to pay its bills. This calculation helps a company understand how long it has to wait to receive cash from its sales and how long it can delay paying its bills, which can help manage cash flow.

Which of the Following Represents the Correct Formula for Calculating