The cash cycle is equal to the: inventory period minus the accounts payable period. operating cycle...

The cash cycle is equal to the: inventory period minus the accounts payable period. operating cycle plus the accounts payable period. operating cycle minus the accounts receivable period. accounts receivable period minus the accounts payable period plus the inventory period. inventory period minus the accounts receivable period minus the accounts payable period.

Expert Solution

What is Cash Cycle:

"Cash Cycle" refers to time period that any company takes to convert its raw material into cash. It is also known as "Cash Conversion Cycle". It starts with procurement of raw material and ends with realization of payments from customers.

Hence, Cash Cycle is calculated as,

No. of Days Inventory Outstanding + No. of Days Accounts Receivable Outstanding - No. of Days Accounts Payable Outstanding.

Here,

No. of days Inventory Outstanding refers to time period taken for procurement of material, conversion it into Finished Goods and then sales it to Customer.

No. of Days Accounts Receivable Outstanding refers to time period taken for realization of payments from customer.

No. of Days Accounts Payable Outstanding refers to time period company takes for payment to vendor.

Correct Answer:

Accounts Receivable Period minus Accounts Payable Period plus Inventory Period.

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jeff jeffy answered 1 year ago

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