Ace the QCAA 2026 Accounting Exam – Balance Success and Dive into Your Future!

The cash conversion cycle shows how long cash is tied up in the operating cycle, from when inventory is purchased to when cash is collected from customers, adjusted by how long we can delay paying suppliers. It is made up of three parts: the inventory conversion period (how long inventory sits before sale), the receivables collection period (how long it takes to collect cash after a sale), and the payables deferral period (how long we can defer paying suppliers). The cycle is calculated as the sum of the first two components minus the deferral period: CCC = inventory conversion period + receivables collection period − payables deferral period. This is why the correct choice includes both the inventory conversion period and the receivables collection period, with the payables deferral period subtracted. The other options omit a component or add the deferral period, which would misstate how the cycle works. A shorter CCC means faster cash recovery; a negative CCC can occur when supplier terms are particularly favorable.