CFA Level I · CFA Level I Exam · Financial Analysis Techniques
A company has days of inventory on hand of 60, days of sales outstanding of 45, and days payables outstanding of 30. Its cash conversion cycle is closest to:
The cash conversion cycle equals days of inventory on hand plus days of sales outstanding minus days payables outstanding. That is 60 plus 45 minus 30, giving 75 days.
- A15 days
- B75 daysCorrect
- C135 days
Explanation
Cash conversion cycle = DIO + DSO - DPO = 60 + 45 - 30 = 75 days. Option C adds the payables days instead of subtracting them.
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