Chapter 6
Cash Machine
Coining money with negative working capital
The pattern
The Cash Machine pattern involves running a business with a negative cash conversion cycle. As will be seen from the following formula, the cash conversion cycle is the timespan between the spending and collection of cash by a company. More specifically, it defines the average storage time of inventory, including raw materials, work-in-process, finished products and delayed payment terms by customers and suppliers:
| Cash conversion cycle | = | Inventory conversion period |
| + | Receivables conversion period | |
| − | Payables conversion period |
In order to run a ...
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