Using ratios to analyse companies

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11. Cash-to-cash cycle

Definition: Stock days + debtor days - creditor days

Significance:

This shows how long the company has to finance its own stocks for. It measures the number of days between the initial cash outflow (when the company pays its suppliers) to the time it receives cash from customers.

Calculation:

The figures required have already been calculated on earlier pages of this tutorial.

Example

So, in M&S's case :

Cash-to-Cash cycle calculator Stock   days Debtor   days Creditor   days   Cash-to-Cash:    days

Yardstick:

Companies that receive cash from their customers at the time of sale and that have their stock under good control, will have short cash-to-cash days similar to M&S.

1. Why bother with ratios? 2. A word of warning 3. The P&L and the balance sheet 4. Grouping the ratios 5. Profit margin 6. Return on capital employed (ROCE) 7. Sales as a multiple of capital employed 8. Stockturn 9. Debt collection 10. Payment of trade creditors 11. Cash-to-cash cycle 12. Gearing 13. Interest cover 14. Current ratio 15. Quick ratio (acid test) 16. Earnings ratios 17. Dividend ratios 18. Other ratios 19. Sources of information 20. Conclusion

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