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Efficiency and cash conversion cycleAnalyst
How fast a company turns inventory and receivables into cash.
What you’ll enter
- Revenue
- Cost of goods sold
- Average inventory
- Average receivables
- Average payables
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The formula
Cash conversion cycle = DIO + DSO − DPO
DIO is days to sell inventory, DSO is days to collect from customers, and DPO is days taken to pay suppliers. A shorter cycle frees up cash.