Cash Conversion Cycle
The Cash Conversion Cycle (CCC) measures the days it takes a company to convert inventory or resources into cash. The formula is CCC = DIO + DSO – DPO. DIO (Days Inventory Outstanding) is the average time to sell inventory. DSO (Days Sales Outstanding) is the average time to collect receivables. DPO (Days Payable Outstanding) is the average time to pay suppliers. A shorter CCC indicates efficient cash flow management, while a longer CCC suggests delays in turning investments into cash. For example, if DIO = 40, DSO = 30, and DPO = 35, CCC = 35 days.
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