Business FinancesQuestion 501 of 1605
A contractor has DSO of 55 days, days inventory outstanding (DIO) of 30 days, and DPO of 40 days. What is the cash conversion (working-capital) cycle?
a.35 days
b.45 days
c.65 days
d.125 days
Explanation
Cash Conversion Cycle = DSO + DIO − DPO = 55 + 30 − 40 = 45 days. This is how long cash is tied up between paying suppliers and collecting from customers. Shorter cycles reduce the need for working capital.
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