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Cash Conversion Cycle

The number of days between a business paying for its stock and collecting cash from the customer who buys it: stock days plus receivable days less payable days. A retailer that holds 95 days of stock, waits 5 days for card settlements and pays suppliers after 60 days has a 40-day cycle, which is the working capital its sales tie up. A shorter cycle frees cash as the business grows; a stock build in a slow season lengthens it.

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