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Image source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.
How fast does Cubic turn cash into cash?
An important question when considering some of the market’s best stocks. Measuring how fast a company can turn cash outflows into cash inflows can be just as important as the profit a company reports as “earnings.”
A good measurement to compute how fast Cubic turns cash into cash, or cash into goods and services and back into cash, is the cash conversion cycle. To calculate the cash conversion cycle, you must add days inventory outstanding to day sales outstanding, then subtract days payable outstanding.
The “measure illustrates how quickly a company can convert its products into cash through sales. The shorter the cycle, the less time capital is tied up in the business process, and thus the better for the company's bottom line.” (www.investopedia.com)
Cubic’s current cash conversion cycle for the trailing twelve month period is looking very good, 76.6 days, which is 21.1 days better than the five year average of 97.7 days.