Free Cash Conversion Cycle Training Video
Other than some minor editing below for clarity, this is the transcript from the beginning of the cash conversion cycle training video which is further below.
Now we’re going to talk about the cash conversion cycle…
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Again, this is something we’ve talked about already a little bit and why it’s so important but we’ll continue talking about this here on a preliminary basis.
The first thing I noticed here is the huge massive jump in this number since 2007 from 216 days to 600.3 days in the trailing twelve months or a rise of 64% in that time.
That is scary…
I make notes of everything I do so I don’t have to rely on my memory in the past or in the future when I’m doing my analysis.
I don’t want to rely on any guessing I want to rely on hard facts and what I was thinking as I was researching the company.
We’ve already talked about this a little bit but it such an important concept I’m going to continue going over it again and again.
Hopefully, everything begins to make more sense the more we talk about it and the more you learn about it in future training as well.
This number is one of the most important numbers I look at on preliminary basis like we talked about the other day.
Why?
Because with this one number I can tell the company is having a hard time selling its products.
This means it’s taking a long time for them to get paid by customers.
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This leads to having a hard time paying suppliers and that their inventory may be overvalued and need to be written down or off at some point.
And this all could affect the company’s balance sheet strength and valuation down the road.
None of these are good.
I can tell this from comparing the first number of days in 2007 to the second number of days in the trailing twelve month period.
In most cases, I go back 5 years but this one is such a huge jump – almost triple – I went back 10 years.
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You can watch the full video below…
Or if you’d like to learn more about the Cash Conversion Cycle go to the prior link.
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