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      Question

      The cash conversion cycle is calculated

      as:
      A DIO + DSO - DPO Correct Answer Incorrect Answer
      B DIO + DPO - DSO Correct Answer Incorrect Answer
      C DSO + DPO - DIO Correct Answer Incorrect Answer
      D DIO + DSO + DPO Correct Answer Incorrect Answer
      E (DIO + DSO) / DPO Correct Answer Incorrect Answer

      Solution

      The Cash Conversion Cycle (CCC) measures how long a company's cash is tied up in working capital. DIO (Days Inventory Outstanding) is the time to sell inventory. DSO (Days Sales Outstanding) is the time to collect receivables. DPO (Days Payable Outstanding) is the time to pay suppliers. The formula is: CCC = DIO + DSO - DPO. You add the days your cash is tied up (DIO and DSO) and subtract the days you delay payment to suppliers (DPO).

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