Strategic Supply Chain Management Practice Exam

What does the Cash-to-Cash Cycle measure?

1. The time taken to convert cash into inventory and back to cash

2. The total expenses incurred by a firm

3. The revenue generated from sales

4. The average time customers take to pay

The correct answer is: The time taken to convert cash into inventory and back to cash

The Cash-to-Cash Cycle is a fundamental metric in supply chain management that measures the duration it takes for a company to convert its investments in inventory back into cash through sales. It effectively tracks the flow of cash in relation to the company's inventory and accounts receivable processes. By focusing on the time taken to convert cash into inventory and then back to cash, this metric helps businesses understand the efficiency of their supply chain operations and working capital management. A shorter cycle indicates better performance and liquidity, meaning the firm can quickly recoup its cash after purchasing inventory and making sales. The other options do not capture the specific focus of the Cash-to-Cash Cycle. While total expenses incurred, revenue generated from sales, and the time customers take to pay are all important financial metrics, they do not relate to the tracking of cash flow specifically through the inventory process as the Cash-to-Cash Cycle does.