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    Question

    What does ‘working capital cycle’ (cash conversion

    cycle) measure?
    A Time to convert purchases into sales only Correct Answer Incorrect Answer
    B Time between cash outflow for purchase and cash inflow from sale Correct Answer Incorrect Answer
    C Operating profit divided by inventory Correct Answer Incorrect Answer
    D Ratio of current assets to current liabilities Correct Answer Incorrect Answer
    E Time to convert fixed assets to cash Correct Answer Incorrect Answer

    Solution

    CCC = Days inventory + Days receivables − Days payables; measures time between cash outflow and inflow.

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