Mark's Manufacturing's average age of accounts receivable is 45 days, the average age of accounts payable is 40 days, and the average age of inventory is 69 days. Assuming a 365-day year, what is the length of its cash conversion cycle

Length of cash conversion cycle= 74 days

Explanation:

Cash conversion cycle is a measure of liquidity risk as a result of growth of a business. It considers how long a firm will be deprived of cash if it decides to increase amount it spends on inventory to expand customer sales.

CCC is how long a business takes to convert inventory to cash flow from sales.

Companies can shorten CCC by encouraging upfront payments and keeping repayment of credit less than 30 days.

CCC= Days of sales outstanding+ Days of inventory outstanding - Days of payables outstanding

CCC= 45+69-40

CCC= 74 days

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