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. 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 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 keeps its cash available to spend on things it needs, like inventory, so 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.

Here's a look at how a number of the best-known diversified conglomerates turn a multitude of products into cash.

Company

DIO

+

DSO

-

DPO

=

CCC

CAPS Rating (out of 5)

Honeywell (NYSE:HON)

55.8

+

56.4

-

49.8

=

62.4

****

Tyco (NYSE:TYC)

64.0

+

60.8

-

41.4

=

83.4

*****

Dover (NYSE:DOV)

60.8

+

58.5

-

35.9

=

83.4

***

United Technologies (NYSE:UTX)

71.0

+

56.7

-

43.5

=

84.2

*****

3M (NYSE:MMM)

78.6

+

51.4

-

41.8

=

88.2

*****

Each week, we look for the top companies in different industries that make fast cash, and this particular group doesn't seem to have been discounted by players in the Motley Fool CAPS investor intelligence database.

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