# What is the length of the firm's cash conversion cycle? Negus Enterprises has an inventory...

## Question:

What is the length of the firm's cash conversion cycle?

Negus Enterprises has an inventory conversion period of 71 days, an average collection period of 39 days, and a payables deferral period of 20 days. Assume that cost of goods sold is 80% of sales. Assume 365 days in a year for your calculations.

## Cash Cycle:

The cash conversion cycle represents the total time that a company requires to sell its inventory, convert its receivables, and pay its suppliers. It is equal to the difference between the operating cycle and the payables deferral period.

Become a Study.com member to unlock this answer!

Negus Enterprises' length of the cash conversion cycle is 90 days.

Explanation:

• Cash conversion cycle = Average collection period + Inventory...

Operating Cycle & Cash Cycle: Definition & Calculations

from

Chapter 17 / Lesson 2
5.7K

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.