Exam CSCP Topic 3 Question 444 Discussion

Actual exam question for APICS's CSCP exam
Question #: 444
Topic #: 3
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:

Suggested Answer: B Vote an answer

The cash-to-cash cycle time is calculated as the sum of days' sales outstanding (DSO), days' inventory outstanding (DIO), and minus days' payables outstanding (DPO). Given:
* Cash-to-cash cycle time = 60 days
* DSO = 35 days
* DPO = 25 days
First, determine the DIO: =60+2535=50 daysDIO=60+2535=50 days
If inventory is reduced by 20%, the new DIO is: =50×(10.20)=40 daysDIOnew=50×(10.20)=40 days Now, calculate the new cash-to-cash cycle time: New cash-to-cash cycle time=+New cash-to-cash cycle time= DSO+DIOnewDPO New cash-to-cash cycle time=35+4025=50 daysNew cash-to-cash cycle time=35+4025=50 days Therefore, the new cash-to-cash cycle time will be approximately 50 days. References:
* Coyle, J. J., Langley, C. J., Novack, R. A., & Gibson, B. (2016). Supply Chain Management: A Logistics Perspective. Cengage Learning.
* Jacobs, F. R., & Chase, R. B. (2020). Operations and Supply Chain Management. McGraw-Hill Education.

by Polly at Mar 23, 2025, 12:10 PM

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