Cash conversion

The cash conversion rate (or simply cash conversion) measures the proportion of profits that are converted to cash flow. It is therefore:

cashflow ÷profits

This can be measured at several levels, but the profit and cash flow measures should match for this to be meaningful. It is usual to use post tax profit and free cash flow before dividends as they both measure profits available to share holders. One could also look at the conversion of operating profit into operating cashflow.