Vaihtokierto

Vaihtokierto is a Finnish term used in business and finance to describe the cycle through which resources, products, and cash flow move through a company’s operations. In practice it refers to the turnover time from acquiring inputs to converting them into cash, i.e., the speed at which working capital circulates.

In many contexts the term aligns with the cash conversion cycle (CCC). The CCC is the net time between paying suppliers for inputs and collecting payment from customers, expressed in days. It is composed of three elements: days inventory outstanding (DIO), days sales outstanding (DSO), and days payable outstanding (DPO). The relationship is CCC = DIO + DSO - DPO.

Applications: By analyzing the vaihtokierto, firms assess liquidity and operational efficiency. Reducing the cycle can involve faster inventory turnover, shorter receivables collection periods, or extending payables where feasible.

Example: If DIO is 30 days, DSO is 25 days, DPO is 40 days, the CCC is 15 days, indicating the firm ties up capital for about two weeks less than its supplier credit allows.

Limitations: The length of the vaihtokierto varies by industry, business model, and seasonality. It should be interpreted with other financial metrics, and changes may reflect strategic choices rather than fundamental liquidity issues.