A firm has a cash conversion cycle of 31.6 days. It turns over its inventory on average in 43.1 days and pays off its payables in an average of 23.2 days. Its receivables turnover ratio equals ________.
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A. B. C. D.A
CCC = (Average receivables collection period) plus (Average inventory processing time) minus (Average payables payment period).
Hence, 31.6 = Average receivables collection period + 43.1 - 23.2, giving
Average receivables collection period = 31.6 - 43.1 + 23.2 = 11.7 days. Since Average receivables collection period = 365/receivables turnover, the receivables turnover ratio equals 365/11.7 = 31.2.