Cash conversion cycle

The number of days between paying for inventory and collecting the cash from selling it. Inventory days plus receivable days minus payable days.

A distributor holding 73 days of stock, collecting in 49 days and paying suppliers in 51 days has a 71-day cycle. Think about what that means for growth. Every rupee of extra sales needs 71 days of funding before it comes back.

This measure can go negative, and that's what makes it powerful. A supermarket sells for cash in a fortnight and pays suppliers in 60 days, so its cycle is around minus 45 days and growth generates cash. That structural difference is most of why retail can expand quickly on modest capital, and why the same expansion in a capital-goods business needs a rights issue. Any margin advantage explains far less of it.

Track it quarterly. It deteriorates before profit does.