Working Capital Cycle

The Working Capital Cycle (also called the Cash Conversion Cycle) measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. It encompasses three stages: the period to sell inventory, the period to collect receivables, and the period to pay suppliers (payables). A shorter cycle indicates greater operational efficiency. For investors, analysing a company's working capital cycle reveals insights into its cash flow management, supplier relationships, and inventory turnover—key indicators of business quality.