Cash Conversion Cycle (CCC)

The Cash Conversion Cycle (CCC) is a financial metric that measures how long it takes for a company to convert its investments in inventory and other resources into cash from sales. The CCC assesses the time it takes for a company to buy inventory, sell it, and collect cash from customers. The cycle consists of three components: Days Inventory Outstanding (DIO), Days Sales Outstanding (DSO), and Days Payables Outstanding (DPO). A shorter CCC indicates better liquidity and operational efficiency, as the company can quickly turn resources into cash.

Example

A retail company has a CCC of 45 days, meaning it takes 45 days to convert its inventory and sales into cash, after accounting for its payables period.