We've all heard that cash is king. But a fistful of dollars today deserves the royal treatment more than a wad of cash down the road. We want our companies turning their products into cash -- and we want it fast!

The cash conversion cycle
Enter the cash conversion cycle. It tells you how quickly a company takes its raw materials, makes them into products, and turns sales into cash in the bank. The faster a company can turn over its inventory, the more efficiently it's managing its assets. There are three components of the cycle, and here's how they operate.

  • Days Inventory Outstanding (DIO)
    Inventory sitting on store shelves or in stockrooms is not doing the company, or the investor, any good. The number of days the inventory sits there measures how quickly management can get those Speedos off the racks and onto the beaches of Malibu. Obviously, lower numbers are better.

    DIO = 365 days/(cost of goods sold/average inventory)
  • Days Sales Outstanding (DSO)
    Outstanding sales are those the company hasn't yet been paid for; they're languishing in accounts receivable. We want our companies to not only make a quick sale but also get paid for it right away. The faster, the better.

    DSO = 365 days/(sales/average accounts receivable)
  • Days Payable Outstanding (DPO)
    While we want customers to pay us quickly, we want to take our sweet time paying our own bills. By paying suppliers slowly, a company has more time to use its cash to earn interest, so we want this number to be higher.

    DPO = 365 days/(cost of goods sold/accounts payable)

We don't need an average of our bills outstanding here; we just need to know the ending number.

Putting it all together
With the three pieces of the puzzle calculated, we can figure out how long a company is taking to get paid for the products its customers are buying from inventory, minus the number of days it takes it to pay its suppliers. The cash conversion cycle, or CCC, equals DIO + DSO - DPO.

Women's fashion is often said to be fickle, and keeping the product moving is key to being successful. Here are seven of the top women's fashionistas that are making heads turn:









CAPS Rating
(out of 5)










New York & Co. (NYSE:NWY)









Coldwater Creek (NASDAQ:CWTR)









Chico's FAS (NYSE:CHS)









Christopher & Banks (NYSE:CBK)









Charming Shoppes (NASDAQ:CHRS)









The Limited (NYSE:LTD)









Data provided by Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS.

Here we see the degree to which women's retailers are able to turn fashion into cash. Each week, we look for the top companies that make fast cash in various industries, and this group seems to have caught the eye of the 28,000 ranked members of the Motley Fool CAPS investor-intelligence database.

Not every company that makes fast cash will excel. We want only those that the CAPS community thinks are the best. Four- and five-star stocks are the ones investors believe will outperform the S&P 500.

The Foolish advantage
Of course, this isn't a list of stocks to buy or sell. It's the jumping-off point for further research. And the CAPS community is telling us that while it likes Motley Fool Hidden Gems recommendation New York & Co., it likes Motley Fool Income Investor recommendation The Limited even more with its four-star rating. That one, and Chico's, too.

Is it the rumor that The Limited might be spinning off another of its brands or two that has investors giving "elevator eyes" to what Income Investor editor James Early calls a "branding behemoth"?

CAPS player shak614782 foresaw this coming back in January, when he picked this company as an outperform. While Chico's may be trying to dress down The Limited's Victoria Secret with its own Soma brand, he noted that "[Victoria's] Secret is dominant. No [other] store comes close to controlling and selling underwear to women. They have an incredible moat."

So is this a skimpy pick, or will Chico's top The Limited in the lingerie market? Work with tens of thousands of your fellow Foolish investors at Motley Fool CAPS to uncover the best stocks and convert your money into cash profits. Get started today, right away, at no cost to you.

The Limited is a recommendation of Motley Fool Income Investor. A 30-day trial subscription gives you a fast look at all of the recommendations currently beating the market by nearly 10 percentage points. Click here to start!

New York & Co. is a recommendation of Motley Fool Hidden Gems.

Fool contributor Rich Duprey does not have a financial interest in any of the stocks mentioned in the article. You can see his holdings here. The Motley Fool has a disclosure policy.