Cash Conversion Cycle - Meaning, Formula, Calculation & Interpretations

In this cash conversion cycle tutorial, we'll go over the finer details of what it means, its formula and step-by-step calculations. Following that, we will calculate the cash conversion cycle using the Colgate Case Study and interpret the findings.

What is Cash Conversion Cycle?
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The cash conversion cycle measures the time it takes for a company to turn its inventory and other inputs into cash. It takes into account how much time the company needs to sell inventory, collect receivables, and pay its bills.

Formula
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Cash Conversion Cycle Formula = Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) – Days Payable Outstanding (DPO)

Interpretation of Cash Conversion Cycle
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- A shorter cash conversion cycle is beneficial to a company since it allows it to buy, sell, and receive cash from customers more quickly and vice versa.

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[ashmitjacob]

Really happy after too many tutorials, thanks to you.

[teresadcruz]

Best video on topic cash conversion cycle. I learnt many new things and excellent way of explanation. Great Sir.

[narayanbista]

The tutorial explained in this video was very useful to understand the cash conversion cycle in such a easy manner thank you for such an informative video.

[leahnightingale]

Thank you for this amazing video. Keep such videos coming.

[madasamy]

This is good presentation.. More useful for all investors and finance students... 👍👍... Attache the presentation file for download...

[nikitachomal]

Hlo sir, very informative video. I have a dbt. Purchases in payable ratio has to be credit pur. Ryt?

[cmanas]

It would be beneficial if you can create a tutorial series specific to IT Service industry as the income statement and Balance sheet of such companies are slightly different.

[stock_invest]

Please upload video of how to calculate intrinsic value of stock.

[Ganezan]

When Colgate is good in Average payable days compared to PG, how come Colgate is Bad in Cash Conversion days? Not understanding that logic

[ravikumarepili]

Can't see video properly because video covers the captions what you speak.