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1 April, 21:33

Bob's Burgers has an Inventory Turnover of 6.0, an Accounts Receivable Turnover of 8.5, and an Accounts Payable Turnover of 10.1. What is the length of their Cash Conversion Cycle?

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  1. 1 April, 23:45
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    The length of their Cash Conversion Cycle is 68 days.

    Explanation:

    The lenght of cash cycle can be determine by subtracting days in which amount is payable to creditors from sum of days required to make good and days in which amount will be recovered form customers. Detail calculation is given below.

    Turnover in day

    Inventory Turnover = 365/6 = 61

    Accounts Receivable Turnover = 365/8.5 = 43

    Payable Turnover = 365/10.1 = 36

    Cash Conversion Cycle = 61 + 43 - 36 = 68 days
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