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 after collecting credit sales from customers and paying off its suppliers. The faster a company can turn over its inventory, the more efficiently it's managing its assets. Here's how the three components of the cycle 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 = (average inventory/annual cost of goods sold) * 365 days
  • 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 quick sales, but also get paid for them right away. The faster, the better.
    DSO = (average accounts receivable/annual sales) * 365 days
  • 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, companies have more cash available to spend on things they need, like inventory, so we want this number to be higher.
    DPO = (average accounts payable/annual cost of goods sold) * 365 days

Putting it all together
With all 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.

Anytime you're dealing with heavy-equipment companies, you'll find that their business models are heavy, too. Turnaround times might not be as fast as we've seen with other industries. So let's see which of them can manufacture the fastest way to bring home the cash.

Company

DIO

+

DSO

-

DPO

=

CCC

CAPS Rating (out of 5)

Deere & Co. (NYSE:DE)

48.2

+

52.2

-

73.1

=

27.3

*****

Ingersoll-Rand (NYSE:IR)

47.9

+

56.8

-

38.0

=

66.7

*****

Terex (NYSE:TEX)

95.8

+

45.3

-

55.4

=

85.7

*****

Caterpillar (NYSE:CAT)

78.3

+

72.8

-

46.6

=

104.5

****

Kubota (NYSE:KUB)

90.3

+

117.7

-

94.2

=

113.8

***

Source: CapitalIQ, a division of Standard & Poor's, and Motley Fool CAPS.

Each week, we look for the top companies in different industries that make fast cash. It seems that the 75,000 participants in the Motley Fool CAPS investor intelligence database have dug deep to manufacture support for these particular firms: almost all rate four or five stars. Of course, this isn't a list of stocks to buy or sell -- just a jumping-off point for further research.

Nothing runs like a Deere
While we're probably most familiar with its farm equipment, like tractors, Deere & Co. also makes construction and forestry equipment, as well as residential products like lawn mowers. It also runs a profitable credit segment to finance these purchases.

Deere surpasses its rivals in turning tractors into cash in its ability to forestall its payments to suppliers for more than two months. While inventory turnover and sales outstanding compare well with competitor Ingersoll-Rand, Deere's ability to delay payments by nearly twice as long translates into a cash cycle 2.5 times faster than its nearest competitor. Moreover, Deere was able to increases sales this year by 8%, while cost of goods sold rose only 6%, and it more than doubled its payables outstanding over the previous year.

More than 800 CAPS investors have cast their votes for Deere, and 95% believe it will outperform the market. Some 98% of the All-Stars who made a call on Deere agree. (All-Stars are the CAPS investors who consistently outperform their peers over time.) Top-rated CAPS All-Star eheck9, with a 90.41 player rating, notes that the company has been benefiting from ethanol demand driving corn prices higher, as well as from its loyal customer base:

Deere is consistently ahead of the curve with new emission standards going into effect over the next several years on all large machinery. As demand for the corn used in ethanol increases profits for farmers go up. Farmers being good commonsense folk know that if they don't spend their hard earned money the [government gets] it in taxes so many of them use it to make large equipment purchases. Brand recognition among non agricultural folks is high as well.

Yet some now are questioning whether ethanol is the answer to America's energy problems. Will that concern come back to haunt Deere in the future?

Don't be foiled again
So which company will continue to be the big star of cash creation? Tell us your picks at Motley Fool CAPS, as you work with thousands of your fellow Foolish investors to uncover the best stocks and convert your money into cash profits. Best of all, it's absolutely free -- get started now!

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