Cash Conversion Days

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Cash Conversion Days

Explanation: Cash Conversion Days measures how long it takes for a company to turn its investments in inventory and sales into cash. In simpler terms, it shows how quickly a company can change the stuff it has into actual money in the bank.


Example: TCS (Tata Consultancy Services) had a cash conversion cycle of 75.69 days in the fiscal year 2023 (FY23). This means it takes TCS roughly 76 days to transform its work and sales into cash. In the case of TCS, they might provide services to clients, invoice them, then wait for those clients to pay. So, from the time they finish the work to the time they get paid, it takes about 76 days on average.

This metric is crucial because the shorter the cash conversion cycle, the quicker a company can access cash to cover its expenses, invest in growth, or pay dividends. If TCS could reduce its cash conversion cycle, it could potentially improve its cash flow and financial health.

You can view the Cash Conversion Days for any company on Radar in the Ratios section.

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