Multiple choice general knowledge math & puzzles

An analyst has calculated the following ratios for a company: Number of days of receivables 48 Number of days of inventory 37 Number of days of payables 28 The cash conversion cycle for the company is closest to:

  1. 57 days

  2. 85 days

  3. 113 days

  4. 65
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The cash conversion cycle (CCC) measures the time between paying for raw materials and receiving cash from customers. The formula is CCC = Days of Receivables + Days of Inventory - Days of Payables. Substituting: 48 + 37 - 28 = 57 days. A shorter CCC indicates more efficient working capital management. Option B (85) would result from adding all three components instead of subtracting payables.

AI explanation

To answer this question, we need to understand the concept of the cash conversion cycle (CCC). The CCC measures the time it takes for a company to convert its resources into cash flow. It is calculated by adding the number of days of inventory and the number of days of receivables and subtracting the number of days of payables.

Given: Number of days of receivables: 48 Number of days of inventory: 37 Number of days of payables: 28

To calculate the cash conversion cycle (CCC), we use the following formula:

CCC = Number of days of inventory + Number of days of receivables - Number of days of payables

Substituting the given values, we get:

CCC = 37 + 48 - 28 CCC = 57

Therefore, the cash conversion cycle for the company is closest to 57 days.

The correct answer is A.

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