Cash Conversion Period

The cash conversion period, also known as the cash conversion cycle, measures the time it takes for a company to convert its investments in inventory and other resources into cash from sales. It is calculated by adding the days inventory outstanding (DIO), days sales outstanding (DSO), and days payable outstanding (DPO) and then subtracting the DPO. A shorter cash conversion period indicates that a company is more efficient at managing its working capital and converting assets into cash, which is crucial for maintaining healthy cash flow and liquidity.