Cash Conversion Cycle - Meaning, Formula, Calculation & Interpretations

In this cash conversion cycle tutorial, we'll go over the finer details of what it means, its formula and step-by-step calculations. Following that, we will calculate the cash conversion cycle using the Colgate Case Study and interpret the findings.
You can download the Colgate Cash Conversion Cycle template from this link - https://www.wallstreetmojo.com/ratio-...

What is Cash Conversion Cycle?
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The cash conversion cycle measures the time it takes for a company to turn its inventory and other inputs into cash. It takes into account how much time the company needs to sell inventory, collect receivables, and pay its bills.

Formula
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Cash Conversion Cycle Formula = Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) – Days Payable Outstanding (DPO)

Interpretation of Cash Conversion Cycle
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- A shorter cash conversion cycle is beneficial to a company since it allows it to buy, sell, and receive cash from customers more quickly and vice versa.
For more details, you can refer to our article - https://www.wallstreetmojo.com/cash-c...

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