Inventory conversion period is the average time required to convert raw materials into finished goods and then to sell them, which

can be expressed as $\frac{\text{I}\text{n}\text{v}\text{e}\text{n}\text{t}\text{o}\text{r}\text{y}}{\frac{\text{C}\text{a}\text{s}\text{t}of\text{g}\text{r}\text{e}\text{d}\text{s}}{306}}.$

Average collection period $($ACP$)$ is the average length of time required to convert the firm's receivables into cash, that is$,$ to collect

cash following a sale, it is also called the days sales outstanding $($DSO$)$ which can be expressed as $\frac{\text{R}\text{e}\text{c}\text{e}\text{i}\text{v}\text{a}\text{b}\text{l}\text{e}\text{s}}{\frac{\text{S}\text{a}\text{l}\text{a}\text{s}}{306}}.$

Payables deferral period is the average length of time between the purchase of materials and labor and the payment of cash for

Suppose your start$-$up buys $$110,000$ of merchandise each month, which is sold within $90$ days. You have $75$ days to pay your suppliers, and

allow your customers $120$ days to pay for their purchases. You expect your monthly sales to be $$124,000.$ You borrow funds required to support

operations from a bank and must repay the loans as soon as cash is available.

Complete the following table by finding out the number of days each period takes, as well as the cash conversion cycle.

Period

Days

Inventory conversion period

Average collection period

Payables deferral period

Cash conversion cycle