What is the Cash Conversion Cycle (CCC)?
ADays Sales Outstanding + Days Inventory Outstanding + Days Payable Outstanding
BDays Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding
CDays Payable Outstanding - Days Sales Outstanding
DTotal Cash Flow from Operations / Current Liabilities
Explanation
Core Concept: Cash Conversion Cycle measures the time (in days) it takes for a business to convert investments in inventory back into cash inflows from sales. Formula: CCC = DIO + DSO – DPO. Context/Distractors: Adding DPO yields operating cycle without supplier credit deduction. Exam Tip/Key Fact: A shorter or negative CCC indicates highly efficient working capital management.
Exam Relevance
- Topic: Working Capital Management
- Subtopic: Cash Conversion Cycle
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