The cash gap is the time between paying for inventory
and other bills and collecting cash from the sales of products or services.
The company, therefore, needs to cover the shortage by borrowings or raising
equity. Stretching payables, utilizing just-in-time inventory or emphasizing
credit card payments will lessen the need for financing. The bigger the gap
the more resources are needed to cover the shortage; thus, profitability is
reduced and leverage increased. The shorter the cash gap, usually the more
profitable and efficient the organization, and the higher its market value.
Click here for information on:
Cash Per Share