Question

Westerly Industries has the following financial information. What is its cash conversion​ cycle? (Hint: Use a​ 365-day year.)

Sales	​$110 comma 000110,000
Cost of Goods Sold	88 comma 00088,000
Accounts Receivable	35 comma 20035,200
Inventory	19 comma 80019,800
Accounts Payable	47 comma 30047,300

The cash conversion cycle is

nothing

days.  ​(Round to two decimal​ places.)

Answer 1

The cash conversion cycle is computed as shown below:

= Average collection period + Average Inventory days - Average payable period

= (Account receivable / Sales) x 365 + (Inventory / cost of goods sold) x 365 - (Accounts payable / cost of goods sold) x 365

= ($ 35,200 / $ 110,000) x 365 + ($ 19,800 / $ 88,000) x 365 - ($ 47,300 / $ 88,000) x 365

= 116.8 days + 82.125 days - 196.1875 days

= 2.74 days Approximately

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