Cash Conversion Cycle (CCC)

Definition

The Cash Conversion Cycle or CCC estimates the approximate number of days that a company will take to convert inventory into cash once it has made a sale to a customer.

Example

Cash Conversion Cycle = Days Outstanding Inventory + Days Outstanding Sales – Days Outstanding Payable

Why it matters

CCC is a crucial business metric since it reveals how efficiently a business can carry out its operations. By looking at its CCC, a business can know how quickly it's able to convert cash into sales and sales back into cash. With this metric, business owners can get a clear picture of the company's cash flow position. A shorter CCC means faster growth.

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