Profit
What is Cash conversion cycle?
How long cash is tied up between paying for inventory and collecting the money from selling it. A shorter cycle means the same amount of cash funds more sales per year, which is often the real constraint on growth.
Why it matters in practice
This is the single number that explains why a profitable ecommerce business can still run out of money. It is the days your stock sits, plus the days you wait to be paid, minus the days your supplier lets you wait before paying them. A seller who pays a factory up front, waits for a container to arrive, holds stock for a season, and then waits again for a marketplace payout can have cash locked up for months at a time. Every day you take off that cycle is a day of inventory you no longer have to fund, which is why negotiating supplier terms often does more for growth than another point of margin.
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