Measures the time taken to convert inventory into cash through sales.
What it Measures ?
How long it takes to convert investment into cash.
Relevant StakeHolders
CFO, Working Capital Manager
In-depth Use Case / Real-world Example
Cash Conversion Cycle is calculated by adding the number of days inventory is held, the number of days it takes to collect receivables, and subtracting the number of days it takes to pay accounts payable. For example, if inventory days are 30, receivable days are 40, and payable days are 20, the cycle is 50 days. A shorter cycle means better liquidity and efficiency in managing working capital.
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