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...our final "speed" metric is the so-called cash-to-cash cycle, or cash conversion cycle (briefly described in modules SCM101 and SCM104). Here we try to approximate the average time between a company's outlay for materials and labor to build a product and the moment the company gets paid for selling the product. This length of time is approximated by:

...Recall days of supply of inventory ("days of inventory") from the prior discussion of inventory metrics; this is the average time inventory waits in a warehouse. Accounts receivable is the number of days it takes to collect payment from your customers, and accounts payable is how long you wait to pay your suppliers. For example, if a company had 45 days of inventory, and its accounts receivable were 30 days and its accounts payable were 35 days, then the calculation would be:

In this case your cash-to-cash cycle is 40 days from the moment you pay for raw materials to the time you get paid from customers...