Working Capital and Inventory Management
Posted by Dylan Wan on September 28, 2014
The importance of the inventory management can be best described via working capital management.
Cash is the blood of the company.
Cash conversion cycle is measured as
( ( Account Receivables + Inventory – Account Payables ) / (Total Revenue / 365)
These Youtube videos from Mark West from Redstack Analytics describes this CCC metric very well.
This CCC number alone may not be very useful. You need to watch this number over time, or compare it with the competitors.
We see this is where the XBRL data can be useful.