Cash conversion

Cash conversion compares operating cash flow with reported net income. A ratio of 1.00 means the company generated one dollar of operating cash for each dollar of accounting profit; 0.80 means it generated eighty cents. A single quarter can move because customers pay earlier or later, inventory changes, or suppliers extend different payment terms, so the multi-year trend matters more than one reading. Persistent conversion below reported profit can signal that earnings are tied up in receivables or inventory, or that non-cash accounting choices are lifting profit. Strong conversion supports the quality of reported earnings, but it does not by itself prove that all cash is available to shareholders because capital spending still has to be funded.