What Is a Cash Conversion Period?

Refers to the length of the period from the payment of cash from the purchase of inventory to the recovery of cash.

Cash flow period

Determine the best holding model based on cash flow speed.

Correlation operation

1. Calculate cash turnover period: from purchasing materials to

How to strengthen the strategic management of cash turnover 1, cash flow, turnover rate, profit, growth rate and other financial elements are the basic elements of business strategy. To make these elements profitable for the business, you need to add the key business element of customers. Strategic management is to maintain the "customer" loyalty to the enterprise for a long time, create value for customers for a long time, and create profits for the enterprise in the process of transferring value to customers. The key issue is that enterprises must closely integrate these business elements to form long-term strategic relationships and models based on their own competitive advantages and the opportunities provided by the competitive environment. The cash flow model provides an analysis and evaluation model for connecting these elements. Although some connections are direct and others are indirect, the model is the starting point of strategic analysis of an enterprise and the end of strategic evaluation of an enterprise.

2. The cash flow model is not only applicable to the overall analysis and evaluation of the enterprise, but also to the analysis and evaluation of the single product of the enterprise. If the inventory turnover rate, accounts receivable turnover rate, and accounts payable turnover rate of a single product can be accurately measured, it will not be difficult to find out which products occupy a large amount of corporate funds, which products rarely occupy or even provide funds for other products Support and create considerable profits for the business. Therefore, the cash flow model provides useful clues for the strategic product adjustment of an enterprise. The analysis and evaluation of different cash turnover periods of a single product may be the starting point of corporate strategic change.

3. Focus on cash flow, not just profit, market share, etc. If the market share cannot pay the company's operating costs, and the company cannot have a positive cash flow, then the company does not have a good business strategy and needs to make strategic adjustments. The basic elements of strategy are not products and markets, but business processes that can continuously provide value to customers, and the competitiveness of an enterprise is achieved in the process of transforming business processes into strategic capabilities.

In short, companies need to systematically improve the quality of operations, accelerate the speed of cash flow, and improve their ability to continue to create value. They should avoid talking about cash turnover periods in terms of cash turnover periods. They need to study and treat various factors affecting the realization of corporate value from a strategic perspective. Establish a comprehensive control system for cash flow management.