https://orwiki.org/index.php?action=history&feed=atom&title=m%3AAE1m:AE1 - Revision history2026-05-06T23:08:41ZRevision history for this page on the wikiMediaWiki 1.28.0https://orwiki.org/index.php?title=m:AE1&diff=11966&oldid=prevOrwiki: 1 revision imported2017-06-10T13:48:16Z<p>1 revision imported</p>
<p><b>New page</b></p><div>{{this}} measures the average period it takes a company to acquire and sell Inventory, collect Receivables and pay Payables, demonstrating the efficiency with which cash flows through the business. <br />
===Calculation===<br />
{{math|{{this}}|Days [[link::t:AR|Receivables]] Outstanding|add|Days of [[link::t:INV]]|subs|Days [[link::t:AP|Payables]] Outstanding}}<br />
where<br />
* [[m:AE11|Days Receivables Outstanding]] = The average number of days it takes a company to collect cash generated from sales<br />
* [[m:AE12|Days of Inventory]] = The average number of days worth of Inventory the company holds on its books.<br />
* [[m:AE13|Days Payables Outstanding]] = The average number of days the company takes to pay its invoices.<br />
Unit of measure: Days (Calendar days)<br />
===Importance===<br />
Companies that measure and optimize working capital will be in a better position to prevent a working capital deficit. A working capital deficit can damage the profitability of the business and affect its operations in the short term. In the long term, poor working capital management can compromise a company’s ability to attract potential investors.<br />
<br />
A lower number of days indicate a better {{this}}. A negative number is the most desirable as this indicates the company receives cash before paying it, thus eliminating the need to finance purchased materials and services. Reducing the {{this}} frees up cash. <br />
<br />
According to a study by REL, a division of The Hackett Group, on average, top-performing U.S. companies have 49% less working capital tied up in operations, collect from customers nearly 18 days sooner, pay suppliers 11 days later, and hold less than half the inventory of median companies.<br />
[[Category:Metric]][[Category:Supply Chain]]<br />
{{Object<br />
|name=Cash Conversion Cycle<br />
|parent=m:AE<br />
|sort=51000<br />
|level=1<br />
|keywords=Cash Conversion, Cycle, Supply Chain, Inventory, Payables, Receivables<br />
|description=The average period it takes a company to acquire and sell Inventory, collect Receivables and pay Payables; demonstrating the efficiency with which cash flows through the business<br />
}}</div>Orwiki