See Also:
Days Sales Outstanding (DSO)
Days Inventory Outstanding (DIO)
Days Payables Outstanding (DPO)
How to Develop Daily Cash Report
13 Week Cash Flow Report
How to Create Dynamic Cash Flow Projections
Cash Cycle Definition
The cash cycle, or cash conversion cycle, refers to the time it takes a company to turn raw materials into cash. In other words, it is the time between purchasing the raw materials used to make a product and collecting the money from selling the product.
Cash cycle is typically measured in days. A shorter cash cycle is better than a longer cash cycle. A company with a shorter cash cycle has more working capital and less cash tied up in inventory and receivable accounts, which means it is less dependent on borrowed money. Cash cycle depends largely on operational efficiency.