Financial Reporting and Analysis Q181
0. Selected 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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