What is Cash Conversion Cycle?
Time to convert investments in inventory and other resources into cash.
How to calculate it
Calculate Cash Conversion Cycle as: DSO + DIO − DPO. Pull the inputs from your connected data and track the trend over time in your dashboard.
Examples
Example 1
DSO 46 + DIO 30 - DPO 40 = 36-day cycle. A negative cycle means suppliers effectively fund your growth.
Example 2
DSO of 44 plus DIO of 30 minus DPO of 50 -> a 24-day cycle. Extending supplier terms to 70 days would push it close to zero, easing cash needs.
Why it matters
The cash conversion cycle measures the time to turn investments in inventory and other resources into cash, capturing working-capital efficiency end to end. A shorter or negative cycle means the business funds its own growth, reducing the need for external financing. It combines collection, inventory and payables timing, so improvement can come from any of the three.
Benchmark context
Lower is better, and a negative cycle is a genuine strength; benchmark against industry peers, since inventory-light businesses naturally run shorter cycles.
Common pitfalls
Ignoring that a negative cycle can be a strength.
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