The Loud Noise Recordings Corporation has forecasted sales of $30,000,000 for next year and... Question: The Loud Noise Recordings Corporation has forecasted sales of$30,000,000 for next year and expects its cost of goods sold (COGS) to remain at 80% of sales. Currently, the firm holds $3,200,000 in inventories,$2,300,000 in accounts receivable, and \$2,600,000 in accounts payable.

What is the length of Loud Noise Recordings' cash conversion cycle (CCC)?

a. 46.39 days

b. 37.11 days

c. 44.53 days

d. 38.97 days

Cash Cycle:

The time taken from the conversion of inventory into sales to the conversion of receivables into cash and the conversion of payables into cash is determined by the cash conversion cycle. It simply is the difference between the operating cycle and the accounts payable period.

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Correct answer: Option b. 37.11 days.

Explanation:

Step 1:

• Inventory holding period = (365 days * Average inventory) / COGS
• Inventory holding...

Operating Cycle & Cash Cycle: Definition & Calculations

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Chapter 17 / Lesson 2
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The operating cycle and cash conversion cycle are both tools to evaluate the timeline of when a business will become profitable. Explore the calculations of each, and identify their importance to a business.