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From reported earnings to cash conversion
Reported profit and cash generation describe different parts of a business. Comparing them requires attention to timing, working capital and the accounting treatment of individual items.
Keep the definitions consistent
The starting point is a consistent reporting period and a clear definition of each measure. Changes in scope or classification should be visible before comparisons are made.
Look behind the movement
A change in cash conversion can reflect customer collections, inventory decisions or supplier terms. The analysis should identify which movements are supported by the records and which explanations remain hypotheses.
Keep the definitions consistent
The starting point is a consistent reporting period and a clear definition of each measure. Changes in scope or classification should be visible before comparisons are made.
Look behind the movement
A change in cash conversion can reflect customer collections, inventory decisions or supplier terms. The analysis should identify which movements are supported by the records and which explanations remain hypotheses.