2016-11-21 00:00:00 Cash Flow English Discover the importance of the cash conversion cycle, a metric that expresses how many days it takes for a company to convert inputs into... https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2017/03/08214811/Food-Truck-Owner-Enjoys-A-Fast-Cash-Conversion-Cycle-In-Her-Business.jpg Cash Conversion Cycle

Cash Conversion Cycle

0 min read

The cash conversion cycle expresses the length of time, in days, that it takes for a company to convert its resource inputs into cash flow. A low cash conversion cycle is desirable, because it means that the company can quickly convert inputs into cash. The sooner that a company can convert its inputs to cash, the more efficient the company is at production, sales and collection of receivables. The cash conversion cycle is often used to judge management’s effectiveness.To calculate the cash conversion cycle, add the days inventory outstanding to the days sales outstanding, and subtract the days payables outstanding.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

What Are FX Fees?

Picture this: you check your credit card statement after an international business…

Read more

Launching a Brand Extension

As a small business, you face the same brand dilemma your larger…

Read more

Grow Your Sales With Product Line Extensions

You know from experience that it takes a mountain of work to…

Read more