Cash Conversion Cycle
The time (in days) it takes a company to convert its investments in inventory and other resources into cash from sales.
Also known as: CCC, Cash cycle, Net operating cycle
One-line definition
The cash conversion cycle measures how long cash is tied up in the operating cycle before it comes back.
Formula
CCC = DIO + DSO − DPO
Interpretation
A shorter (or negative) CCC means the business collects cash faster than it pays suppliers — a sign of strong working capital management. Negative CCC (like in retail or subscription businesses) is a structural competitive advantage.
Related terms
DSO (Days Sales Outstanding)
The average number of days it takes a company to collect payment after a sale has been made — a key working capital metric.
DPO (Days Payable Outstanding)
The average number of days a company takes to pay its suppliers — a measure of how effectively payables are managed as a source of working capital funding.
DIO (Days Inventory Outstanding)
The average number of days a company holds inventory before selling it — a measure of inventory efficiency and supply chain management.
Net Working Capital (NWC / WCR)
Net Working Capital (NWC), also called Working Capital Requirement (WCR) — the normalised working capital a target needs to operate, and a direct lever on the M&A purchase price.