CCC Calculation
A company has a DIO of 30 days, a DSO of 45 days, and a DPO of 60 days.
- DSO:
- 45
- DPO:
- 60
- CCC:
- 15
- DIO:
- 30
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Accounting★ Essential
Cash Conversion Cycle
CCC measures the time needed to convert cash investments into cash flows.
Also known as : CCC
Deep dive
The Cash Conversion Cycle (CCC) is a metric that measures the time it takes for a company to convert its cash investments into cash flows. It combines DIO, DSO, and DPO (Days Payable Outstanding). A short CCC indicates efficient cash management, while a long CCC may signal cash flow issues. It's crucial not to confuse CCC with net cash flow, which is a different measure.
Key formula
CCC = DIO + DSO - DPO
Real-world examples
Pitfalls to avoid
- Ignoring the impact of payment terms on CCC.
- Failing to adjust CCC for seasonal variations.
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