Cash Conversion Cycle
Also called: CCC, cash cycle
What is Cash Conversion Cycle?
The cash conversion cycle measures how many days pass between paying for inventory and collecting the cash from selling it. It combines days of stock, days sales outstanding and days payable outstanding.
Why Cash Conversion Cycle matters
The cycle is the number that explains why a profitable business needs a loan. A long cycle means every rupee of growth requires funding before it returns.
Cash Conversion Cycle formula
CCC = Days of inventory + DSO − DPO
A negative result means customers pay you before your suppliers are due.
How Cash Conversion Cycle works in practice
Attack whichever component is longest: clear slow stock, tighten collections, or use supplier terms fully. Businesses with a negative cycle collect before they pay and effectively grow on their suppliers' money.
Worked example
45 days of stock plus a 40-day DSO less a 30-day DPO is a 55-day cycle to fund.
Frequently asked questions
Shorter is better, and negative is excellent — common in cash-and-carry retail and quick service formats.