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The Cash Conversion Cycle (CCC) is a key metric in financial analysis that measures how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. The formula for calculating the CCC is as follows CCC = DIO + DSO - DPO Where: - DIO (Days of Inventory Outstanding) is the average number of days it takes for a company to sell off its inventory. - DSO (Days Sales Outstanding) is the average number of days it takes for a company to collect cash from credit purchases. - DPO (Days Payable Outstanding) is the average number of days a company takes to pay its suppliers for products received. The CCC is a measure of the efficiency of a company's operations and management. A trend of decreasing or steady CCC values over multiple periods is a good sign, while rising ones should lead to more investigation and analysis.
