Cash Conversion Cycle
The number of days it takes a business to convert money spent on inventory and operations back into cash from sales, accounting for how quickly it collects and pays.
It’s calculated by adding days inventory is held and days sales outstanding, then subtracting days payable outstanding, giving a single number for how long cash is tied up in the operating cycle before it’s recovered.
A shorter cash conversion cycle generally means a business needs less external financing to fund its operations, while a longer one often points toward a working capital gap that financing like a line of credit or invoice factoring is built to bridge.
Related funding options
Ready to explore your funding options?
One application, matched to funding options across our lending network.