What is the time period required for a firm to convert its investments in inventory and operational resources into cash inflow from sales?
APayback Period
BOperating Cycle
CDays Sales Outstanding
DCash Conversion Cycle (CCC)
Explanation
* Cash Conversion Cycle (CCC) = DIO + DSO – DPO (Days Inventory Outstanding + Days Sales Outstanding – Days Payable Outstanding).
* Measures time elapsed between paying for raw materials and collecting cash from sales.
* Shorter CCC reflects efficient working capital management.
Exam Relevance
- Topic: Working Capital Management
- Subtopic: Cash Cycle Analysis
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