Question

The Cash conversion cycle has been calculated at 27 Days for the current period. The Company has reviewed the components and discovered that Accounts Receivable collections are currently 31 days and the Accounts Payable Disbursements are currently 44 days. Given this information, how many days are calculated in the Inventory Balance?

Answer 1

40 days in the Inventory Balance

Step-by-step explanation:

In this question, we need to apply the cash conversion cycle equation to find out the inventory days

We know that,

Cash conversion cycle = Days inventory outstanding + days sale outstanding - days payable outstanding

27 days = Days inventory outstanding + 31 days - 44 days

27 days = Days inventory outstanding - 13 days

So, the Days inventory outstanding = 27 days + 13 days = 40 days