Finance homework ..dealing with accts. payable and recvable.?

Question

Calculate the cash conversion cycle if the inventory period is 60 days, the accounts receivable period is 60 days, and the accounts payable period is 30 days.

Answer 1

Cash Cycle = Days on Hand + Days Sales Outstanding + Days Payable

DOH = 360 ÷ Inventory Turnover

DSO = 360 ÷ AR Turnover

DP = 360 ÷ Payable Turnover

Cash Cycle = (360÷60)+(360÷60)+(360÷30)

Cash Cycle = 24 days

Some books would use 365 days in one year, I used 360 to get an exact amount.