Renald Company Limited estimates that it takes the company 21 days on average to pay off its suppliers. It also knows that it has days' sales in inventory of 43 days and days sales' outstanding of 44 days. What is its cash conversion cycle? Round final answers to 4 decimal places.

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BlackTom AI · Accepted Answer

The question asks for the cash conversion cycle (CCC) for Renald Company Limited, given the following day-based metrics: average payables period (DPO) = 21 days, days inventory outstanding (DIO) = 43 days, and days sales outstanding (DSO) = 44 days.

First, identify the components of the CCC. The CCC measures the time (in days) between when a company pays for its inventory and when it collects cash from its customers, and is calculated as:
CCC = DIO + DSO − DPO.

Next, substitute the given values into the formula:
DIO = 43 days
DSO = 44 days
DPO = 21 days
CCC = 43 + 44 − 21.

Compute the sum of DIO and DSO:
43 + 44 = 87.
Then subtract DPO:
87 − 21 = 66.

Consider rounding requirements: the problem asks to round final answers to 4 decimal places. The computed CCC is 66 days exactly, which can be expressed as 66.0000 when rounded to four decimal places.

Thus, the CCC in days, rounded to four decimals, is 66.0000 days. If you were to verify steps, you’d confirm that the DIO and DSO contribute positively to the cycle (they extend the period before cash is received), while the DPO reduces the cycle (it represents the period the company can defer payment). The arithmetic aligns with the standard CCC formula and interpretation.

FINANCE 251 Quiz 8 (Topic 6)

Renald Company Limited estimates that it takes the company 21 days on average to pay off its suppliers. It also knows that it has days' sales in inventory of 43 days and days sales' outstanding of 44 days. What is its cash conversion cycle? Round final answers to 4 decimal places.

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