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Answer: 171 days
The **cash conversion cycle (CCC)** is calculated as: \[ CCC = \text{Days of Inventory Outstanding (DOH)} + \text{Days of Sales Outstanding (DSO)} - \text{Days of Payables Outstanding (DPO)} \] - **DOH** is derived by dividing the number of days in the period (360) by the inventory turnover (2), resulting in 180 days. - **DSO** is calculated by dividing the number of days in the period (360) by the receivables turnover (10), yielding 36 days. - **DPO** is determined by dividing the number of days in the period (360) by the payables turnover (8), giving 45 days. Thus, the CCC is: \[ 180 + 36 - 45 = 171 \text{ days} \] Option B is correct because it accurately reflects the calculation of the cash conversion cycle. Options A and C are incorrect due to errors in the treatment of DPO (subtracted in A and added in C).
Author: LeetQuiz Editorial Team
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An analyst gathers the following information about a company: Payables turnover of 8, Inventory turnover of 2, and Receivables turnover of 10. Assuming all purchases and sales are made on credit, the cash conversion cycle (based on a 360-day year) is:
A
99 days
B
171 days
C
261 days
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