The operating cash flow cycle compares the combined age of inventory and receivables with the age of payables in order to identify a funding gap.

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The operating cash flow cycle, also known as the cash conversion cycle, measures how long it takes for a company to convert its investments in inventory and accounts receivable into cash. The cycle is calculated by subtracting the number of days of payables outstanding from the sum of the number of days of inventory and receivables outstanding. It is used to identify potential funding gaps or liquidity issues.

The Operating Cash Flow Cycle Compares the Combined Age of Inventory