Cash conversion cycle
How many days pass between paying for materials and receiving cash from the customer. Throughout that gap the business funds itself.
Formula
\text{Cycle} = \text{Days inventory} + \text{Days receivable} - \text{Days payable}Each term is the turnover of that item in days over one period. The measure can be negative, which is a normal state for retail.
How to read the number
A negative cycle means the business runs on its suppliers' money: the customer pays before the company settles up.
When the metric lies
Seasonality distorts it: a cycle computed from year-end balances at a company whose sales peak in winter does not describe its ordinary state.
Where it is used
The metric is calculated across every security in the catalogue and appears on the instrument card, in the multiples table and in the screener.
Also known as: ccc