It is not likely that you will hear an Analyst praise a company’s increase in average days payable. Nor will you hear a CEO boast about having an industry low DIO. It’s not even common that a company will go out of the way to alert you that their DSO is improving, even though that would mean they are receiving cash faster. While these metrics are far from popular, they form the basis for the calculation of the Cash Conversion Cycle or CCC.

The Cash Conversion Cycle isn’t exactly a headline-grabbing metric in itself. It is primarily used by accountants and business operators to gauge the efficiency and internal performance of the business. While not an overly popular metric, understanding it can give you a leg up on spotting an opportunity.

In this post, we will discuss what the Cash Conversion Cycle is, how you can calculate it, and how you can use it to your advantage.

What is the Cash Conversion Cycle?

If you are evaluating an acquisition opportunity it is vital to understand how well the underlying business model of a company is performing. Earnings are what people talk about, cash is what keeps the business going. It would be logical to assume that cash flow is less prone to manipulation and an overall truer metric for understanding company performance. However, you should know what you see on cash flow statements isn't always what it seems. In this post, we will explore just a few tactics that make cash flow look better than what it is.

Business cycles are fascinating. Driven by human nature, business cycles go through phases of expansion and contraction displaying similar patterns over and over again. In this post, we are going to explore the stages of a traditional business cycle and what to look out for at each phase.