- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 4. Working Capital and Liquidity
- Subject 1. Cash Conversion Cycle
CFA Practice Question
Which of the following correctly defines the operating cycle?
II. Inventory period + Accounts receivable period
III. Cash conversion cycle + Accounts payable period
IV. Inventory period - Accounts receivable period - Accounts payable period
I. Cash conversion cycle - Accounts payable period
II. Inventory period + Accounts receivable period
III. Cash conversion cycle + Accounts payable period
IV. Inventory period - Accounts receivable period - Accounts payable period
A. I and II
B. II and III
C. II, III, and IV
Explanation: Cash conversion cycle = Accounts receivable period + Inventory period - Accounts payable period
User Contributed Comments 5
User | Comment |
---|---|
maria15 | The question and answer doesn't make sense. Shouldn't it be A? |
maria15 | Never mind..I got it. lol |
CFA1Dec11 | Cash conversion cycle = Accounts receivable period + Inventory period - Accounts payable period And Operating Cycle = Accounts receivable period + Inventory period |
Rivermax | The option II is in all selections therefore use this formula to help and rearrange for the others... |
Sp1993 | Operating cycle = (Cash Conversion Cycle) PLUS payables period no? Seems legit lol... |