# Cash conversion cycle

The days between paying for inventory and collecting on the sale.

A long cycle ties up [working capital](https://searchspheresource.com/glossary/working-capital) you have to fund, so a growing business with a slow one can be cash-starved while perfectly profitable. That is the trap the first year after closing springs on buyers who read the profit line and nothing else: growth consumes cash before it produces any. The cycle is what the [working-capital peg](https://searchspheresource.com/glossary/working-capital-peg) is really trying to price, and a business with a negative one, paid before it pays, funds its own growth.

In numbers: 40 days of inventory plus 55 days to collect minus 30 days to pay suppliers is a 65-day cash conversion cycle, often $50k or more of working capital the owner must fund.

Source: https://searchspheresource.com/glossary/cash-conversion-cycle
Not dated: A definition is editorial: what a term means, why it matters, and an example. None of it reads a source that can go stale, so there is no date to take and a stamped one would be the build time wearing a costume.

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