The cash conversion cycle (CCC) is calculated as:

$CCC = \text{Days of Inventory on Hand (DOH)} + \text{Days of Sales Outstanding (DSO)} - \text{Number of Days of Payables}$

Calculation for Year 1:

• Number of Days of Payables = 365 / Payables Turnover = 365 / 18 ≈ 20.2778
• CCC = 13 (DOH) + 22 (DSO) - 20.2778 ≈ 14.7222

Calculation for Year 2:

• Number of Days of Payables = 365 / 36 ≈ 10.1389
• CCC = 11 (DOH) + 24 (DSO) - 10.1389 ≈ 24.8611

Analysis: The CCC increased from 14.7222 in Year 1 to 24.8611 in Year 2, indicating a longer cycle. A longer CCC suggests lower liquidity, meaning the company's liquidity position deteriorated.

Why B and C are Incorrect:

• B ignores the change in the number of days of payables, leading to an incorrect conclusion of unchanged liquidity.
• C incorrectly uses the payables turnover directly in the CCC calculation, resulting in a misleading improvement in liquidity.