Working capital. It's the lifeblood of business, ensuring corporate survival on a daily basis. Yet it's also a huge black hole, sucking up billions in cash on corporate balance sheets -- cash that could be reinvested in the business or even returned to shareholders.

Working capital, simply defined, is current assets less current liabilities. It represents cash tied up in receivables, inventories, and other short-term investments, plus liquid cash, net of short-term financing provided by payroll float (accrued, but not actually paid, salaries); customer payables; and short-term debt.

REL Consultancy Group publishes an annual report on working capital levels, and the latest edition estimates that U.S. companies have nearly $590 billion of excess cash tied up in working capital that could be recaptured without hurting ongoing operations. This cash could easily be redistributed to shareholders, increasing dividend yields while reducing total invested capital and enhancing ROIC. Liquidating this cash would be a win-win situation for companies and investors alike.

So how does a company free up working capital? Well, because much of the cash is tied up in stale inventory and short-term customer credits, reducing cash conversion cycles (CCC) is the best method for liquidating working capital. The CCC essentially represents the number of days it takes a company to turn inventory into cash, and the longer the CCC, the greater a company's working capital requirement.

Compare Dell (NASDAQ:DELL) with rival Hewlett-Packard (NYSE:HPQ). Both sell computers, printers, and other technological commodities. However, thanks to its just-in-time, direct-purchase business model, Dell requires only about a penny of working capital for every dollar of sales, compared with HP's $0.18 and Gateway's (NYSE:GTW) $0.09. Not surprisingly, Dell's cash conversion cycle is negative, which means it collects cash, on average, 40 days before paying for inventory. Gateway, another pioneer of direct computer sales, also collects cash prior to paying for inventory.

Efficient processes are the key to short cash conversion cycles, and process improvements can significantly affect working capital management. By focusing relentlessly on supplier management and logistics, Wal-Mart (NYSE:WMT) managed to reduce its cash conversion cycle to 15 days in fiscal 2004 from 22 days in 2000, squeezing $4 billion out of working capital during that time (Wal-Mart's fiscal year ends January 31).

If you keep an eye on the cash conversion cycle, you'll find companies squeezing every last bit of cash from their business and hopefully claiming their share of the $600 billion cash prize.

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David Gardner recommended Dell Computer for Motley Fool Stock Advisor subscribers. Want to see which other companies made the cut? Check it out for six months, risk-free.

Fool contributor Chris Mallon has trouble squeezing a few bucks out of his working capital, let alone 4 billion of them, and he owns none of the companies mentioned.