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Prestige Company has determined the following information for its recent fiscal year. Days inventory outstanding 42.7 days Days payable outstanding 56.8 days Days sales outstanding 91.3 days Compute Prestige Company’s cash conversion cycle. A. 8.2 days B. 77.2 days C. 105.4 days D. 99.5 days E. None of the above

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Answer:

The Prestige Company's cash conversion cycle is 77.2 days which makes B the correct choice.

Explanation:

We have the cash conversion cycle is the average amount of time it takes for company to convert cash outflow for inventory purchasing to cash inflow for revenue generating, which is calculated as:

Cash conversion cycle = Days of inventory outstanding + Days of sales outstanding - Days of payable outstanding = 42.7 + 91.3 - 56.8 = 77.2 days.

So, B. 77.2 days is the correct choice.