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 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 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.

In the high tech world of semiconductors, making the connection between inventory and cash might mean the difference between capturing market share and sharing the crumbs. Here's a look at how some of the leading semiconductor manufacturers are turning silicon into silver:









CAPS Rating (out of 5)

Advanced Micro Devices (NYSE:AMD)









Broadcom (NASDAQ:BRCM)


















Marvell Technology (NASDAQ:MRVL)









Texas Instruments (NYSE:TXN)









Data provided by CapitalIQ, a division of Standard & Poor's; Motley Fool CAPS

Each week we look for the top companies in different industries that make fast cash, and this group seems to have caught the eye of the 28,000-strong Motley Fool CAPS investor intelligence database.

Not every company that makes fast cash will excel. We only want 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. While the disparity in cycles between steel-cage, death-match rivals AMD and Intel immediately jumps out -- suggesting that Intel could do a lot more to unlock the billions it has tied up in working capital -- CAPS investors are pretty sanguine about both. It's broadband communications semiconductor provider Marvell Technology that gets their synapses sparking.

While the market for its products remains strong -- a new Intel-branded flash controller should boost its presence in the portable consumer electronic device segment -- the stock has been cut in half over the past year, in part because of a stock options backdating scandal that claimed its CFO and COO and caused its CEO to be removed as company chairman.

CAPS player jjodoin recently noted how low it has fallen, but sees some tremendous upside potential:

This stock is a fast grower that is close to its 52[-week] low of 15.91. Strong demand for consumer devices such as cameras, cell phones, and anything Apple (NASDAQ:AAPL) (iPhone, iTV both have MRVL chips inside), should fuel above-average growth for Marvell for several years. Although this is a volatile stock, I estimate fair value at $30-32. I believe that we have seen most, if not all, of the downside volatility, and I am looking for a lot of upside on the horizon.

So will Marvell continue to short circuit? Or will it finally make a connection with the 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. Click here to get started today right away at no cost to you.

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