CFA Practice Question

CFA Practice Question

Given the following information, calculate the cash conversion cycle:

Inventory turnover = 12; Receivables turnover = 8; Payables turnover = 9.
A. 116.6.
B. 29.
C. 35.4
Explanation: Convert each turnover figure into days: inventory processing = 30.4 days, receivables = 45.6 days, payables = 365/9 = 40.6 days. 30.4 + 45.6 - 40.6 = 35.4 days.

User Contributed Comments 1

User Comment
mattg turnover #s are the denominators of the components of CCC equation: DOH=365/Inv. turn, DSO=365/receivables turn., # Days Payables=365/Payables turn.

Just divide 365 by each of the #s given, add the first two, subtract the last.
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