CCC (Cash Conversion Cycle)
Private Equity glossary · Valuation, Diligence, & Value Creation
Definition
DSO + DIO - DPO; days of working capital tied up in operations.
CCC (Cash Conversion Cycle) in plain English
The cash conversion cycle answers one blunt question: after a business spends cash to buy stuff, how many days until that cash comes back as sales? It adds up how long products sit in the warehouse (DIO) plus how long customers take to pay their bills (DSO), then subtracts how long the business itself can wait before paying its own suppliers (DPO). Think of a lemonade stand: you buy lemons Monday, sell the lemonade Thursday, get paid Saturday — but you don't owe the lemon guy until next Tuesday, so your money is only "trapped" for the days in between. A shorter cycle means cash frees up faster, which is exactly what a healthy business wants.
Also called: Cash Conversion Cycle
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