Which component is NOT part of the cash conversion cycle?

The cash conversion cycle (CCC) is a key metric used to evaluate the efficiency of a company's management of its working capital. It measures the time taken between outlaying cash for inventory and receiving cash from product sales.

The components that make up the cash conversion cycle include days inventory outstanding, days sales outstanding, and days payable outstanding. Each of these components plays a critical role in understanding how quickly a company can convert its investments in inventory and receivables back into cash:

• Days inventory outstanding reflects the average number of days that a company holds inventory before selling it.

• Days sales outstanding indicates the average number of days it takes to collect payment after a sale.

• Days payable outstanding measures how long a company takes to pay its suppliers, thereby affecting cash flow.

Days cash reserves, however, is not part of the cash conversion cycle. This metric pertains to how many days a company can continue paying its operating expenses using its available cash reserves. While important for assessing liquidity and financial health, it does not directly relate to the operational efficiency of converting cash into inventory and back into cash through sales. This distinction reinforces why days cash reserves is the correct choice as the component not included in the CCC.