Cash Conversion Cycle (CCC)
Corporate Credit Analysis glossary · Financial Statement Analysis & Cash Flow Dynamics
Definition
DSO + DIO - DPO. The number of days between cash outlay for inputs and cash received from customers; a key working-capital efficiency metric for credit analysis.
Cash Conversion Cycle (CCC) in plain English
The Cash Conversion Cycle counts the days a company's cash is 'stuck' between paying for stuff and finally getting paid by customers. Picture a lemonade stand: you buy lemons today (cash out), sit on that inventory for a few days, sell cups on credit, then wait for customers to pay you — the CCC is that whole waiting period, minus however long YOUR suppliers let you delay paying them. In the formula CCC = DSO + DIO - DPO, DIO is days inventory sits, DSO is days waiting for customers to pay, and DPO is days you get to delay paying suppliers. A shorter cycle means cash comes back faster, which is healthier — a company with a long cycle may need to borrow just to cover the gap.
Also called: CCC
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