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 ensures it has that 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 some of the best-known beverage markers are turning effervescence into cash.









CAPS Rating (out of 5)

Coca-Cola (NYSE:KO)









Pepsi (NYSE:PEP)









Cadbury Schweppes (NYSE:CSG)


















Hansen Natural (NASDAQ:HANS)









Jones Soda (NASDAQ:JSDA)









Source: Capital IQ, a division of Standard & Poor's.

Each week, we look for the top companies in different industries that make fast cash, and it seems the 65,000 participants in the Motley Fool CAPS investor-intelligence database are pretty much ready to pop for this particular group, with half the companies garnering four- and five-star ratings.

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 let's zero in on Coke with its incredible negative cash conversion cycle.

Of course, this isn't a list of stocks to buy or sell -- just a jumping-off point for further research.

Bottling up the profits
It's no secret that Coke has amazing distribution strength, which enables it to turn corn syrup into cash more than twice as fast as its rival Pepsi. It minimizes the interest-free loans its customers receive while maximizing the interest-free loans it realizes from its suppliers, all the while making sure its product doesn't go stale on grocers' shelves.

More than 1,600 investors have cast their votes for Coke, and 91% believe it will outperform the market. The numbers are even better for All-Stars, CAPS investors who consistently outperform their peers over time; 93% of them also think it will beat the market.

The All-Stars have many reasons for believing the soda maker will continue to behave like the First Federal Bank of Coca-Cola, including its exposure to foreign markets and its status as a defensive stock. Those are some of the reasons why All-Star optionwinners likes it.

This [is] a play to the defensive side of my portfolio. The stock has [some] of the best international exposure and the continued weak dollar really helps this company. Coke, what can you say about the name. Everyone is going to continue to drink soda. A great company. Buy in this weakness for your long term portfolio.

Go green!
So which company will continue to bubble up 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 and convert your money into cash profits. Best of all, it's absolutely free -- get started today!

Coca-Cola is a recommendation of Motley Fool Inside Value. A 30-day risk-free trial subscription lets you savor the flavor of the service's market-beating returns.

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.