A company has a cash conversion cycle of 70days. If the company’s payables turnover decreases from 11 to 10 and days of sales outstanding increaes by 5 the companys cash conversion cycle will: A decrease by approx. 8 days B decrease by aprx 3 days C increase by aprx 3 days D increase by aprx 2 days Dont understand…
payables turnover decreases from 11 to 10 days to Days Payables changes from 365/11 to 365/10 or from 33.2 to 36.5 – so change of -3.3 days days of sales outstanding increased by 5 so total change = 5 - 3.3 = 2 days Increase choice D
i had this ingrained in my head CCC = DSO + DIO - DPO then you just plug and chug like it was done above .
no need it’s a fairly intuitive concept!