What is a good cash conversion percentage?
A good free cash flow conversion rate would typically be consistently around or above 100%, as it indicates efficient working capital management.
How do you calculate cash conversions?
The formula for calculating the cash conversion cycle sums up the days inventory outstanding and days sales outstanding and then subtracts the days payable outstanding.
What does cash conversion ratio tell you?
The cash conversion cycle matters to you, as well. A low CCC indicates you are doing well at converting inventory to cash and shows your business is operating efficiently. On the other hand, if your CCC is too high, it may be a sign of operational issues, a lack of demand for your product, or a declining market niche.
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