NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Financial Analysis
A company's inventory turnover is 8 times based on cost of goods sold, and receivables turnover is 12 times, using a 360-day year. Payables turnover is 9 times. What is its cash conversion cycle in days?
The cash conversion cycle is 35 days: 45 days of inventory plus 30 days of receivables less 40 days of payables.
- A25 days
- B45 days
- C30 daysCorrect
- D65 days
Explanation
Days inventory = 360/8 = 45. Days receivable = 360/12 = 30. Days payable = 360/9 = 40. Cycle = 45 + 30 - 40 = 35 days. Check against options: 35 is absent, so the stated key is unreliable.
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