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Now lets look at the remaining two ratios in that column :
Cash Conversion Cycle and Working Capital Days
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Cash Conversion Cycle and Working Capital Days
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The cash conversion cycle :
measures the time it takes for a company to convert its investments in inventory and other resources into cash flow from sales. It represents the overall process of purchasing inventory, selling it, and collecting payment from customers.
measures the time it takes for a company to convert its investments in inventory and other resources into cash flow from sales. It represents the overall process of purchasing inventory, selling it, and collecting payment from customers.
A shorter cash conversion cycle is good, as it indicates that a company can generate cash flow more quickly and efficiently from its operational activities. It is an important measure for assessing a company's liquidity and efficiency in managing its working capital.
Working Capital Days:
also known as operating cycle, measures the average number of days it takes for a company to convert its current assets (such as inventory, accounts receivable) into cash to support its ongoing operations.
also known as operating cycle, measures the average number of days it takes for a company to convert its current assets (such as inventory, accounts receivable) into cash to support its ongoing operations.
A shorter working capital days value indicates that the company can quickly convert its assets into cash, which is generally considered favorable. It helps assess the effectiveness of a company's working capital management and its ability to meet short-term obligations.
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