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, cash remains available to spend on things the company 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 portable memory makers are turning bits and bytes into cash.









CAPS Rating (out of 5)

Spansion (NASDAQ:SPSN)









Iomega (NYSE:IOM)









Imation (NYSE:IMN)









Micron (NYSE:MU)


















Source: CapitalIQ, a division of Standard & Poors.

Each week, we look for the top companies in different industries that make fast cash, but the 60,000 participants in the Motley Fool CAPS investor intelligence database don't seem overly excited about this particular group; only SanDisk garners a four-star rating.

Not every company that makes fast cash will excel. We generally 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, so we'll zero in on why SanDisk is the investor favorite, despite having the highest cash cycle. Of course this isn't a list of stocks to buy or sell -- just a jumping-off point for further research.

A flash in the pan
Two of the lowest rated companies also have some of the fastest conversion cycles, but the market Spansion serves -- NOR flash memory -- is experiencing soft demand and its MirrorBit technology still needs to ramp up revenues. Moreover, Intel's (NASDAQ:INTC) entrance into the NOR market may spell trouble. Iomega was once the cutting-edge technology company that made the floppy disk instantaneously obsolete. Unfortunately, its Zip Drive was made similarly obsolete by flash memory cards and although it produces a variety of memory products today, is still unable to shake its Zip Drive history, losing some 95% of its value over the past 10 years. Today the company is a shell of its former self.

The Foolish advantage
SanDisk, on the other hand, is one of those companies that is nearly synonymous with flash memory and happens to be serving the much hotter NAND memory market. However, it's also going to have to start competing against Intel, which is playing both sides of the street in flash memory. Yet Apple's (NASDAQ:AAPL) iPhone may just make the NAND memory market big enough for a few more players.

More than 1,000 investors have cast their votes, and 92% believe it will outperform the market, while a near equal percentage of All-Stars -- CAPS investors who consistently outperform their peers over time -- also think it will beat the market.

CAPS player Fabuloso had the top Bull pitch, with these thoughts on the memory maker:

SanDisk is the leader in NAND Flash memory cards, which are in vogue for many reasons that are useless to describe. The stock's value is unfair to the potential ... market for SanDisk.

The analysts are focusing on irrelevant data like the price the customer is willing to pay for [a] megabyte. It is more than obvious that this is a declining figure, it always [has] been and it always will be. Do you measure the cost per MHz that Intel is charging for their chips?

The future of the mobile devices (cell phones, laptops, mp3 players, etc.) is to avoid moving parts, like hard drives, and since the flash memory is getting cheaper, why not go for the hassle free memory??

Should I point out the obvious that the declining price of the flash memory [is] a good thing for the future of Sandisk because the applications will be much greater??

So which portable memory manufacturer will be the flash in the pan and which will linger on like a pleasant memory? At Motley Fool CAPS 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 today!

Intel is a recommendation of Motley Fool Inside Value. A 30-day risk free trial subscription can be had in a flash simply by clicking here.

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