cash conversion cycle

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Cash conversion cycle

The length of time between a firm's purchase of inventory and the receipt of cash from accounts receivable.

Cash Conversion Cycle

The time between an expenditure of money to make a product and the collection of accounts receivable from the sale of that product. Obviously, a shorter cash conversion cycle is preferable. A longer cash conversion cycle may indicate a current or potential problem with cash flow.

cash conversion cycle

The time required for a business to turn purchases into cash receipts from customers. A short cycle allows a business to quickly acquire cash that can be used for additional purchases or debt repayment.
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Highly-leveraged businesses need to focus on generating cash to service the debt and their financial executives needed to understand the drivers of cash flow--expense control, short cash to cash cycles and stingy reinvestment practices.