A company has a cash conversion cycle of70 days. If the company’s payables turnover decreases from 11 to 10 and days of sales outstanding increase by 5, the company’s cash conversion cycle will: A. decrease by approximately 8 days. B. decrease by approximately 3 days. C. increase by approximately 3 days. D. increase by approximately 2 days.
I got increase by 6 but that is not an option
Days payables difference = (1/10 - 1/11) * 365 = 3.3. Increase of 3.3. That reduces CCC by 3.3. Increase of 5 in days of sales increase CCC by 5. Net is ~2 day increase.
fack payables turnover not days payable. I’m goin to sleep. Thanks