Question

Hauser Corporation has the following metrics for 2016. Amount in days 2016 Days sales outstanding 36.5 Days payables outstanding 24.8 Days inventory outstanding 59.1 The cash conversion cycle for 2016 is: A. 2.2 days B. 61.3 days C. 47.4 days D. 70.8 days E. None of the above

Answer 1

Answer:

The correct answer is D

Explanation:

Cash conversion cycle is defined as the number of days from the purchase date of inventory to the cash inflows from the customers.

The formula for computing the cash conversion cycle is as:

Cash conversion cycle = Days sales outstanding (DSO) + Days inventory outstanding (DIO) - Days Payable Outstanding (DPO)

where

DSO is 36.5

DPO is 24.8

DIO is 59.1

So,putting the values above:

Cash conversion cycle = 36.5 + 59.1 - 24.8

Cash conversion cycle = 95.6 - 24.8

Cash conversion cycle = 70.8 days