Cash Conversion Cycle

The cycle times the operating loop. A manufacturer buys materials, holds stock, sells on credit, and collects cash. Suppliers fund part of that loop by waiting to be paid.

A shorter cycle means less capital is needed for each rupee of sales. A negative cycle means customers and the stock turn fund the business, which is common in some retail.

A falling cycle releases cash as sales grow. A rising cycle absorbs cash and can force debt even when the company is profitable.

Extending payables shortens the cycle on paper and strains suppliers. That is not the same improvement as collecting faster or holding less stock. This term also sits under working-capital efficiency because it is built from those days.