We've all heard the mantra "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 -- fast!

The cash conversion cycle
Enter the cash conversion cycle. It tells us how quickly a company turns cash invested in inventory into cash in the bank, once it's collected credit sales from customers and paid off its suppliers. The faster a company can turn over its inventory, the more efficiently it's managing its assets. Here's how the cycle's three components 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 for which the company hasn't yet been paid; they're languishing in accounts receivable. We want our companies to not only make quick sales, but also get paid for them 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 bills. By paying suppliers slowly, a company has more cash available to spend on things it needs, like inventory. Naturally, we want this number to be higher.
    DPO = 365 days/(cost of goods sold/average accounts payable)

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.

So whether you're trying to find your location, the fish, your stolen car, or the next speed trap, let's see how these location and detection equipment companies have found the way to make quick cash.









CAPS Rating (out of 5)










Harman International (NASDAQ:HAR)




































Source: CapitalIQ, a division of Standard & Poor's. NR = Not rated

Each week, we look for the top companies in different industries that make fast cash. It seems the 65,000 participants in the Motley Fool CAPS investor intelligence database haven't found the signal for this group, since only two of them have earned four- or five-star ratings. Of course, this isn't a list of stocks to buy or sell -- just a jumping-off point for further research.

Not every company that makes fast cash will excel. We generally only want those firms that the CAPS community considers the best. The vast majority of CAPS investors believe these four- and five-star stocks will outperform the S&P 500. Today, we'll hone in on Motley Fool Stock Advisor recommendation Garmin, even though it seemingly has one of the highest cash cycles.

Bottling up the profits
TomTom is Garmin's closest competitor, along with privately held Magellan. Garmin recently surpassed its rival to become the world's largest maker of navigation devices, with a 24.9% market share. The two have also tussled over the years in court, and perhaps even over service providers. Some Fools are speculating that Garmin might want to pursue mapping information provider Navteq (NYSE:NVT), after TomTom gobbled up TeleAtlas. Garmin has seen exploding growth from the North American market, allowing it to maintain profit margins even as unit prices drop.

More than 3,100 investors have rated Garmin, and 97% believe it will outperform the market. Meanwhile, 99% of All-Stars -- CAPS investors who consistently outperform their peers over time -- agree with the bulls.

The All-Stars have many reasons to feel confident that the GPS maker will find its growth groove. Player jester112358 points to "Outstanding revenue growth over the last two years and the best company in its sector." DemonDoug, with a near-perfect 99.98 player rating, simply calls it a "Rule Maker."

And as TMFBreakerJava presciently noted last year:

This company has hit the sweet spot in its growth cycle, with the rapid adoption of GPS technology coinciding with its dominance of the U.S. market. The news has been all good in recent quarter. This is another long term outperformer.

He could have written that last quarter, too, and the points made would still hold water.

Go green!
So which company will continue to locate the cash? At Motley Fool CAPS, you can tell us your picks, as you work with thousands of your fellow Foolish investors to uncover the best stocks. Best of all, it's absolutely free -- get started today!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.