Financial Reporting and Analysis Q181

181Selected financial information for Park’s Company is provided below:

Sale	$2.3 million
Cost of goods sold	$0.98 million
Cash	$0.5 million
Accounts receivable	$0.8 million
Inventory	$0.25 million
Accounts payable	$0.5 million

The company’s cash conversion cycle (in days) is closest to:

Option : A
Explanation : CCC = DOH + DSO – Days Payables = 365/(0.98/0.25) + 365/(2.3/0.8) – 365/(0.98/0.5) = 33.9.
When purchases are not available (as in this case), the COGS can be used to estimate payables turnover.

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