Cash Conversion Cycle
Category: Finance
Definition (plain English)
Cash conversion cycle measures the time cash is tied up between paying suppliers, holding inventory, and collecting customer payments.
Why it matters commercially
A long cycle can starve a profitable import program of cash when deposits, freight, duty, VAT, storage, and receivables all happen before collection.
Example
A wholesaler shortened its cycle by reducing MOQ, moving from Net 60 to Net 30 customers, and timing supplier balances closer to confirmed shipment.
Common mistake
Tracking gross margin without measuring how long cash is locked in inventory, import taxes, supplier prepayments, and open-account receivables.
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