APICS Certified Supply Chain Professional (CSCP) — Question 6

A firm has determined its cash-to-cash cycle time to be 60 days. The number of days' payables outstanding is 25, and number of days' sales outstanding is 35. If the firm reduces its inventory by 20%, the new cash-to-cash cycle time, in days, will be approximately:

Answer options

• A. 48.
• B. 50.
• C. 60.
• D. 88.

Correct answer: B

Explanation

The cash-to-cash cycle is calculated as inventory days plus accounts receivable days minus accounts payable days. Reducing inventory by 20% decreases the cycle time, resulting in a new total of approximately 50 days. The other options do not accurately reflect the calculation with the given data.