Master the Cash Conversion Cycle
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Questions and Answers

What is the formula for Cash Conversion Cycle?

  • Current Assets Turnover + Accounts Receivable Turnover - Accounts Payable Turnover
  • Inventory Turnover + Accounts Receivable Turnover - Accounts Payable Turnover
  • Days Sales in Current Assets + Average Collection Period - Days Payable Outstanding
  • Days Inventory + Average Collection Period - Days Payable Outstanding (correct)

    • What does a higher Accounts Payable Turnover indicate for Company A compared to Company B?

  • Company A has a lower percentage of credit purchases
  • Company A is paying suppliers at a faster rate (correct)
  • Company A is paying suppliers at a slower rate
  • Company A has a longer Average Collection Period

    • What is the relation between Accounts Payable Turnover and Average Collection Period?

  • They are not related (correct)
  • Average Collection Period determines the Accounts Payable Turnover
  • They are inversely related
  • They are directly related

    • What is the formula for Accounts Payable Turnover?

    <p>Credit Purchase / Average Accounts Payable</p> Signup and view all the answers

    If Company A has a higher Accounts Payable Turnover than Company B, does it mean that Company A has a lower percentage of credit purchases?

    <p>No, not necessarily</p> Signup and view all the answers

    What does Accounts Payable Turnover measure?

    <p>The number of times a company pays off its average account payable balance during a year</p> Signup and view all the answers

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