The cash conversion cycle is the amount of time that elapses from the point when the firm inputs materials and labor into the production process to the point when cash is collected from the sale of the resulting finished product.

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The cash conversion cycle is the amount of time that elapses from the point when the firm purchases raw materials to the point when cash is collected from the sale of the resulting finished product. It includes the time involved in the production process as well as the time required for inventory management, accounts receivable collection, and payment of accounts payable. The cycle involves three main components: inventory days, accounts receivable days, and accounts payable days.

The Cash Conversion Cycle Is the Amount of Time That