This is 58 days to convert the raw materials into finished goods + 32 days to collect the receivables. The number of days the company takes to pay for the raw materials is a part of the cash conversion cycle, too, and that has not been included.
This is 58 days to convert the raw materials into finished goods ? 32 days to collect the receivables + 15 days to pay for the raw materials. The number of days required to collect the receivables increases the total cash conversion cycle rather than decreasing it; and the number of days to pay for the raw materials decreases the total cash conversion cycle rather than increasing it.
The cash conversion cycle is equal to the days in inventory minus the days to pay payables plus the days to collect receivables. For a manufacturing company such as this one, the number of days in raw materials inventory are included as well. Therefore, the cash cycle is 75 days (58 ? 15 + 32).
This is 58 days to convert the raw materials into finished goods ? 32 days to collect the receivables ? 15 days to pay for the raw materials. The number of days required to collect the receivables increases the total cash conversion cycle rather than decreasing it.
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