What is the Cash Conversion Cycle (CCC)?

The Cash Conversion Cycle (CCC) is a metric that measures the time (in days) it takes for a business to convert its investments in inventory and other resources into cash from sales.

Formula:

CCC = DIO + DSO – DPO

• DIO (Days Inventory Outstanding): How long inventory sits before being sold.

• DSO (Days Sales Outstanding): How long it takes to collect payment from customers.

• DPO (Days Payable Outstanding): How long the company takes to pay its suppliers.

Why It’s Useful:

• Indicates operational efficiency

• A shorter CCC means quicker cash recovery and better liquidity

• Helps manage working capital and supplier-customer relationships