Cash Conversion Cycle
Time between paying for inventory and receiving payment from customers.
The cash conversion cycle (CCC) measures the number of days between when a company pays for inventory and when it collects cash from selling that inventory. It combines days inventory outstanding, days sales outstanding, and days payable outstanding. A shorter CCC means faster cash recovery; a negative CCC means you collect from customers before paying suppliers.
Formula
CCC = Days Inventory Outstanding + Days Sales Outstanding − Days Payable OutstandingExample
A retailer holds inventory for 30 days, collects from customers in 15 days, and pays suppliers in 45 days—CCC is 30 + 15 - 45 = 0 days, meaning cash cycles perfectly.
Why It Matters for Your Business
The CCC reveals how long your cash is tied up in the operating cycle—shortening it frees up cash for growth or reduces the need for borrowing.
Related Terms
More Cash-flow Terms
Burn Rate
The rate at which a company spends cash monthly.
Cash Flow
The movement of money in and out of a business.
Cash Flow Forecast
A projection of expected cash inflows and outflows.
Cash Flow Statement
A financial statement showing cash movements from operations, investing, and financing.
Free Cash Flow
Cash from operations minus capital expenditures.
Related Financial Guides & Resources
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