Certified in Logistics, Transportation and Distribution (CLTD) 2026 – 400 Free Practice Questions to Pass the Exam

The cash-to-cash cycle time is a key metric in supply chain management that measures how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. The correct formula encompasses three critical components of this cycle:

1. **Days Sales Outstanding (DSO)**: This reflects the average number of days that a company takes to collect payment after a sale has been made. A higher DSO indicates that cash is tied up in receivables for longer periods, which delays cash inflows.

2. **Inventory Days of Supply**: This indicates how many days it takes to sell off the inventory on hand. A longer inventory turnover means that it takes a longer time to convert inventory into sales, thereby prolonging the cash cycle.

3. **Days Payable Outstanding (DPO)**: This represents the average number of days a company takes to pay its suppliers. A higher DPO means the company is able to hold onto its cash longer, which can positively affect its cash flow.

The cash-to-cash cycle is calculated by adding the Days Sales Outstanding to the Inventory Days of Supply and then subtracting Days Payable Outstanding. This formula allows organizations to better understand the efficiency of their cash flow cycle by considering