Financial Quotient

What is cash conversion cycle?

A company's cash conversion cycle refers to the time period starting with the company's cash being expended for the production of goods until cash is received from customers in payment for those goods.

It can be estimated by totalling the days sales outstanding and the days sales in inventory, and subtracting the days payable outstanding.

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A version of this article appeared in the print edition of The Sunday Times on April 22, 2018, with the headline 'What is cash conversion cycle?'. Print Edition | Subscribe