Final answer:
The cash conversion cycle measures how long a firm will be deprived of cash if it increases its investment in inventory in order to expand customer sales. Option B
Step-by-step explanation:
The cash conversion cycle measures how long a firm will be deprived of cash if it increases its investment in inventory in order to expand customer sales. It is a financial metric that calculates the time it takes for a company to convert its investment in inventory into cash from sales. The cash conversion cycle includes three main components:
Days inventory outstanding (DIO): the average number of days it takes for inventory to turn into sales.
Days sales outstanding (DSO): the average number of days it takes for a company to collect cash from its customers.
Days payable outstanding (DPO): the average number of days it takes for a company to pay its suppliers.
By measuring the cash conversion cycle, a firm can assess how efficiently it manages its working capital and how long it takes to convert inventory into cash. Option B