An organization requires an average of 58 days to convert raw materials into finished products to sell. An average of 42 additional days is required to collect receivables. If the organization takes an average of 10 days to pay for the raw materials, how long is its total cash conversion cycle?
The cash conversion cycle (CCC) is calculated using the formula: CCC = Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) - Days Payables Outstanding (DPO). In this case, the organization requires 58 days to convert raw materials into finished products (DIO), 42 days to collect receivables (DSO), and takes 10 days to pay for the raw materials (DPO). Applying the formula: CCC = 58 + 42 - 10, the total cash conversion cycle is 90 days.
90, also why no explanation
how is 110days answer arrived? Pls explain. My answer is 90 days (as per formula)
i get 90 too. to pay is negative so we deduct.
The answer is B
The correct answer is 90 day. 58 +24 -10
90 days. 110 days is inaccurate
The formula for calculating the cash conversion cycle (CCC) is: Cash Conversion Cycle = DIO + DSO – DPO. Where DIO stands for Days inventory outstanding, DSO stands for Days sales outstanding, DPO stands for Days payable outstanding.
It's B!!!