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A company's cash-to-cash cycle time is 36 days. How many weeks of inventory are on hand if the average collection time from customers is 60 days, and the company pays its vendors in 45 days?
Correct Answer: B
The cash-to-cash cycle time is the duration it takes for a company to convert its investments in inventory into cash flows from sales. The formula to calculate the cash-to-cash cycle time is: Cash-to-Cash Cycle Time=Inventory Days+Receivables DaysPayables DaysCash-to-Cash Cycle Time=Inventor Given: * Cash-to-cash cycle time = 36 days * Receivables Days = 60 days * Payables Days = 45 days Rearranging the formula to find the Inventory Days: Inventory Days=Cash-to-Cash Cycle Time+Payables DaysReceivables DaysInventory Days=Cash-to-Cash Cycl Inventory Days=36+4560=21 daysInventory Days=36+4560=21 days To find the number of weeks of inventory on hand: Weeks of Inventory=Inventory Days7=217=3 weeksWeeks of Inventory=7Inventory Days=721=3 weeks References: * APICS Dictionary * "Supply Chain Management: Strategy, Planning, and Operation" by Sunil Chopra and Peter Meindl