Asked by Rainn Cline on Jul 05, 2024
Verified
What is the cash conversion cycle and what does it indicate about the company?
Cash Conversion Cycle
A measure that quantifies the duration a business takes to transform its investments in inventory and resources into cash inflows from sales operations.
- Comprehend and perform calculations on the cash conversion cycle to assess a company's adeptness in handling its working capital.
Verified Answer
MR
Maggie ReevesJul 08, 2024
Final Answer :
It is a measure of how effectively working capital is being managed.It is calculated as days' sales in accounts receivable plus days' sales in inventory less days' payable outstanding.The result is the average time it takes to convert cash outflows into cash inflows.The most efficient companies report cash conversion cycles of 30 days or less.
Learning Objectives
- Comprehend and perform calculations on the cash conversion cycle to assess a company's adeptness in handling its working capital.
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