Envelope
The cash conversion (including cash conversion cycle , English : cash conversion cycle , asset conversion cycle , net operating cycle , working capital cycle or short cash cycle ) refers to the economic controlling the duration of the bond and cash equivalents ( cash ) in the current assets of the company .
It is calculated from the average storage duration ( stock days, Day Inventory Outstanding DIO ) plus the average collection period (duration of debt collection or customer target, Day Sales Outstanding DSO ) minus the average payment term for suppliers (supplier target , Day Payables Outstanding DPO ):
The time it takes to turn money must be viewed as a function of the industry , as there are sometimes great differences between production processes and payment terms . A relatively short cash turnover time indicates efficient liquidity and / or production management. There are therefore three options for optimizing money turnover:
- Efficient and fast production shortens the dwell time of money in the process of providing services. This results in the possibility of faster delivery to the customer and assertion of the claim against him.
- The agreement of the shortest possible payment terms with the customer, possibly with the granting of a discount , accelerates the return of the money to the company.
- On the supplier side, on the other hand, the goal is to agree the longest possible payment periods.
The shorter the capital is tied up, the faster it is available for other (e.g. investment ) use.
The turnover begins with the payment of the suppliers and ends with the payment of the customers. The later the suppliers are paid or the sooner the customers pay, the fewer days the liquidity cycle needs. Customer payments can be accelerated by shortening production or warehousing: The storage period is appealingly shorter.
Example: Due to its market power and its skills in logistics, Amazon is particularly successful in managing its working capital. The following table shows that customers pay significantly faster (after approx. 20 days) than you pay your suppliers yourself (after approx. 60 days). The supplies only have a range of approx. 30 days. As a result, the cash conversion cycle is negative; H. From sales with customers, money regularly flows into the company faster than is required to pay the suppliers. Amazon does not have to hold working capital, but on the contrary can currently invest around 27 billion US dollars in financial markets. In times of high interest rates, this results in a considerable part of the group's profits.
| Figures in EUR million | ||||||
| Fiscal year | 2013 | 2014 | 2015 | 2016 | 2017 | |
| Net working capital | -13,412 | -15,654 | -17,638 | -20,389 | -26,844 | |
| YoY Growth | 16.7% | 12.7% | 15.6% | 31.7% | ||
| Day Sales Outstanding (DSO) | 21st | 21st | 19th | 19th | 22nd | |
| YoY Growth | 1.2% | -9.7% | -2.3% | 17.5% | ||
| Day Payable Outstanding (DPO) | 69 | 64 | 62 | 60 | 61 | |
| YoY Growth | -7.1% | -3.0% | -2.4% | 0.2% | ||
| Days Inventory Outstanding (DIO) | 32 | 32 | 31 | 29 | 28 | |
| YoY Growth | -2.2% | -1.8% | -7.9% | -3.1% | ||
| Days Cash Conversion | -16 | -11 | -12 | -13 | -11 | |
| YoY Growth | -28.3% | 6.5% | 11.7% | -16.6% | ||
swell
- Franz X. Frotzler: Cash Management. Instruments for planning, disposition and control of liquid funds . Uberreuter Verlag, Vienna 1993, ISBN 3-8000-9109-7 .
Web links
- Pedro Ortín-Ángel, Diego Prior: Accounting Turnover Ratios and Cash Conversion Cycle (English, PDF file; 315 kB)
- Measuring the Cash Conversion Cycle in an International Supply Chain engl. (PDF file; 107 kB)
Individual evidence
- ↑ Peter Seppelfricke : company analyzes . Schäffer-Poeschel, 2019, ISBN 978-3-7910-4435-4 ( schaeffer-poeschel.de [accessed January 7, 2020]).