cash conversion cycle

Advanced 💰 Finance / Accounting

Definition

The time between paying suppliers and collecting from customers, measured in days. Negative is magical—you get paid before paying bills, turning working capital into a profit center. Positive means you're funding your customers' purchases with your own money.

Example Usage

Dell's negative cash conversion cycle meant customers paid for computers before Dell paid suppliers, essentially making working capital free.

Origin

Developed as a working capital management metric in the late 20th century.

Fun Fact

Amazon perfected the negative cash conversion cycle, getting paid for books before paying publishers—basically running a bookstore with other people's money.

Source: Working capital management terminology

Related Terms

Intermediate

Overhead Allocation

The process of distributing indirect costs across products or departments, often using arbitrary methods that accountants swear are reasonable. It's making sure everyone shares blame for the heating bill and executive salaries.

💰 Finance / Accounting
Intermediate

P/E Ratio

Price-to-Earnings ratio, a metric that tells you how many years of current earnings you're paying for a stock. A P/E of 500 means investors expect the company to be printing money for five centuries, or that the market has collectively lost its mind. Usually the latter.

💰 Finance / Accounting
Beginner

book-keeping

The meticulous art of recording every financial transaction in a systematic way, traditionally done by people who enjoy spreadsheets more than human interaction. It's the foundation of accounting, involving ledgers, journals, and an obsessive attention to making sure debits equal credits. The only profession where 'excitement' means finding a balanced account.

💰 Finance / Accounting
Intermediate

turnover

Either the total sales a company racks up in a period, or the depressing rate at which employees flee for greener pastures—context is everything. In finance, high turnover is great; in HR, it's a red flag the size of a building. It can also refer to how quickly inventory or assets get cycled through, because apparently one word needs to do the work of five.

💰 Finance / Accounting
Intermediate

accrual accounting

An accounting method that records revenues and expenses when they're earned or incurred, not when cash actually changes hands. It's the difference between promising to pay someone and actually opening your wallet.

💰 Finance / Accounting
Advanced

notional value

The total value of a leveraged position's assets, as opposed to the actual cash you put up, which is usually much less. It's the difference between owning a $100,000 house and the $20,000 you put down.

💰 Finance / Accounting

Translate This Term

See “cash conversion cycle” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.

Try the Translator

Share This Term

Post on XShare on FacebookShare on LinkedIn

Discover a Term

Advanced

valsalva maneuver

The act of holding your breath and bearing down during heavy lifts to increase intra-abdominal pressure and spinal stabi...