CCC (Cash Conversion Cycle)
Private Credit glossary · Loan Structures & Instruments
Definition
Working-capital intensity metric: CCC = DSO + DIO - DPO, measuring the number of days between cash outlay for inventory and cash receipt from customers. A rising CCC consumes free cash flow and signals operational deterioration; in direct-lending underwriting it is monitored alongside the FCF bridge because a short CCC business converts EBITDA to distributable cash more reliably than a working-capital-intensive one.
CCC (Cash Conversion Cycle) in plain English
The Cash Conversion Cycle measures how many DAYS a company's cash is stuck before it comes back as sales — basically, how long money is tied up in running the business. You add the time it takes to sell your inventory and to collect from customers, then subtract how long you get to delay paying your own suppliers: CCC = DSO + DIO - DPO. A short cycle is great — cash comes back fast — while a rising CCC means money is getting trapped, which starves the company of usable cash and often signals trouble. Imagine a lemonade stand: you buy lemons (cash out), wait to sell cups, then wait for a friend to pay you back — but you convinced the lemon seller to let you pay next week, so subtracting that delay tells you how long you're really out of pocket.
Also called: Cash Conversion Cycle
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