I’ve never heard anyone talk about the cash conversion cycle before, but it does for sure paint a great picture of the health of a business. Fluctuations in these numbers are likely always for one reason or another that investors need to know.
I myself like the CCC very much as an indication of potential competitive advantages and checking its components and where they are trending over time
Note, fwiw (I am a computer scientist, no economist and have no track record to speak of) I wrote two articles on how I believe the CCC should be extended: I find it deficient in the aspect of catching float-style businesses, e.g. subscription businesses that are being paid upfront. Unfortunately I never received feedback, so maybe it is just irrelevant (but i think it shouldn't be - also prepaid expenses shouldn't be ignored imo ...after all they all relate to cash)
Nice article Kevin.
I’ve never heard anyone talk about the cash conversion cycle before, but it does for sure paint a great picture of the health of a business. Fluctuations in these numbers are likely always for one reason or another that investors need to know.
Thank you! I hadn't considered it in the past either. One additional data point we can use...
Hi Kevin,
as usual a thoughtful and interesting article.
I myself like the CCC very much as an indication of potential competitive advantages and checking its components and where they are trending over time
Note, fwiw (I am a computer scientist, no economist and have no track record to speak of) I wrote two articles on how I believe the CCC should be extended: I find it deficient in the aspect of catching float-style businesses, e.g. subscription businesses that are being paid upfront. Unfortunately I never received feedback, so maybe it is just irrelevant (but i think it shouldn't be - also prepaid expenses shouldn't be ignored imo ...after all they all relate to cash)
For anyone interested: The latest of my articles is https://compcap.substack.com/p/modifications-to-working-capital
Have a nice weekend and thanks again for another interesting article
Thank you. I'll get back to you with my thoughts on the subscription like business
Great article Kevin!
Thank you!