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An organization requires an average of 58 days to convert raw materials into finished products to sell. An additional 42 days is required to collect receivables. If the organization takes an average of 10 days to pay for raw materials, how long is its total cash conversion cycle?
Correct Answer: B
Comprehensive and Detailed In-Depth Explanation: The cash conversion cycle (CCC) is calculated as: CCC=Days Inventory Outstanding+Days Sales Outstanding#Days Payables Outstanding\text{CCC} = \text {Days Inventory Outstanding} + \text{Days Sales Outstanding} - \text{Days Payables Outstanding} CCC=Days Inventory Outstanding+Days Sales Outstanding#Days Payables Outstanding CCC=58+42#10=90 daysCCC = 58 + 42 - 10 = 90 \text{ days}CCC=58+42#10=90 days Option A (26 days) - Incorrect, as it does not account for total cycle components. Option C (100 days) & Option D (110 days) - Overestimate the cycle by not correctly adjusting for payables. Thus, Option B (90 days) is the correct answer. Reference: IIA Financial Management - Working Capital & Cash Flow Analysis