Perspectives · 06
Understanding Your Cash Conversion Cycle
Profit does not fund operations until inventory becomes a sale and the customer pays.
The management question
Profit does not fund operations until inventory becomes a sale and the customer pays.
The cash conversion cycle estimates how long cash remains committed to operations. It combines inventory and receivable days, then subtracts supplier payment time.
What to examine
Cash conversion cycle
- Inventory days
- Receivable days
- Payable days
- Annual revenue
- Gross margin (%)
Pentos
A practical framework
- 01
Separate volume, price, mix and productivity effects.
- 02
Protect capabilities that create customer value and future growth.
- 03
Link profit improvement to cash and working-capital consequences.
- 04
Run scenarios before converting assumptions into commitments.
Interactive tool
Understanding Your Cash Conversion Cycle
Use this tool as a structured starting point. Results are educational and indicative, not professional, legal, tax, investment or regulated financial advice.
Practical next steps
Cash conversion cycle
- Reconcile profit to cash for the latest operating period.
- Separate margin movement into price, volume, mix and productivity.
- Model the working-capital effect before changing growth assumptions.
Ask Pentos
Still uncertain about the situation?
Tell Pentos what is happening and receive a brief initial perspective at no cost and with no obligation.