Cash Conversion cycle

Question 1

Inventory turnover

Answer 1

number of times a company sells an average level of inventory over the span of a year - COGS/ Average inventory

Question 2

inventory resident period

Answer 2

how many days it takes to sell the average inventory - 365/inventory turnover

Question 3

accounts receivable turnover

Answer 3

ability to collect cash from customers - revenue of sales on account/ average accounts receivable

Question 4

receivable collection period

Answer 4

average amount of days it takes until clients pay their bill - 365/ accounts receivable turnover

Question 5

accounts payable turnover

Answer 5

the company’s ability to pay its suppliers - COGS/ average net accounts payable

Question 6

payable outstanding period

Answer 6

average amount of days it takes until the suppliers are paid - 365/ accounts payable turnover

Question 7

cash conversion cycle

Answer 7

total cash cycle - inventory resident period + receivable collection period - payable outstanding period