CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

An analyst gathers the following information about a company:

Cost of goods sold: $18.4 million
Average inventory: $2.5 million
Receivables turnover: 24 times
Number of days of payables: 25 days

The company's cash conversion cycle (in days) is closest to ______.
A. 40
B. 58
C. 65
Explanation: Cash conversion cycle = DOH+ DSO - payables payment period

Inventory turnover: $18.4/$2.5 = 7.36
DOH: Days of Inventory On Hand = 365/inventory turnover = 365/7.36 = 49.6 days
DSO: Days Sales Outstanding = 365/24 = 15.2 days
Number of days of payables: (25 days)
Cash conversion cycle: 39.8 days

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