IntegrityCCC#75
Cash Ratio measures the reliability of reported earnings versus underlying cash flow.
By Javier Sanz, Founder & Lead AnalystEditorially reviewed
Last updated: Reviewed by: Javier Sanz
Formula
DSO + DIO - DPO
Description
Measures how many days it takes to convert inventory and receivables investments into cash. Combines Days Sales Outstanding, Days Inventory Outstanding, and Days Payables Outstanding. Companies with shorter or negative cash conversion cycles have superior working capital management.
Interpretation
Below 60 days is generally good. Negative CCC (like Amazon) means the company collects cash from customers before paying suppliers, an extremely powerful business model. Rising CCC may signal working capital deterioration.
Related metrics: Debt-to-Equity Ratio (D/E), Debt-to-Assets Ratio, Net Debt to EBITDA (Net Debt/EBITDA). (Updated 2026)
Further Reading
- SEC EDGAR primary filings on Cash Ratio- Primary source filings used to calculate Cash Ratio.
FAQ
How is Cash Ratio calculated?+
Cash Ratio uses the formula: DSO + DIO - DPO. compare against sector median on /screener with the Sector filter applied. ValueMarkers refreshes the calculation within 24 hours of each new SEC filing using SEC EDGAR 10-K cash-flow reconciliation + footnote disclosures.
What is a good Cash Ratio value by sector?+
There is no single 'good' value for Cash Ratio — context is sector-driven. compare against sector median on /screener with the Sector filter applied. The /screener exposes sector-relative percentiles for Cash Ratio on every ticker, so you can compare against the sector median rather than the broad-market median.
Which investors use Cash Ratio?+
James Chanos, Carson Block, forensic-accounting analysts cite Cash Ratio as a key input to to detect earnings manipulation and accruals inflation. The academic anchor is Beneish (1999) and Sloan (1996) accruals research. ValueMarkers weights this within the Integrity pillar of the VMCI score (15% of total).
What are the limitations of Cash Ratio?+
Cash Ratio can mislead in false positives in fast-growing or restructuring companies. Pair Cash Ratio with at least two cross-checks from other VMCI pillars — for example, free cash flow trend, balance-sheet quality, and earnings consistency — before drawing a single-metric conclusion.
Where can I see live Cash Ratio data?+
Visit any /stock/[ticker] page on ValueMarkers to see live Cash Ratio data, sector percentiles, and the VMCI composite score that integrates Cash Ratio with 119 other indicators across 100,000+ stocks. The free /screener exposes Cash Ratio as a filterable column.
Related Integrity Indicators
Debt-to-Equity Ratio (D/E)OCF/Debt
Debt-to-Equity Ratio expresses the reliability of reported earnings versus underlying cash flow.
Debt-to-Assets RatioFCF Conv
Debt-to-Assets Ratio measures the reliability of reported earnings versus underlying cash flow.
Net Debt to EBITDA (Net Debt/EBITDA)Accrual
Net Debt to EBITDA expresses the reliability of reported earnings versus underlying cash flow.
Current RatioCapEx/Rev
Current Ratio measures the reliability of reported earnings versus underlying cash flow.
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