Specialist in working capital management, cash conversion cycle optimization, and corporate liquidity analysis.
The **Cash Conversion Cycle (CCC) Calculator** measures the time (in days) it takes for a company to convert its cash investment in inventory back into cash from sales. It is the most comprehensive measure of operational liquidity. Enter values for any three of the four core metrics to solve for the missing one.
Cash Conversion Cycle Calculator
Instructions: Enter values for any three of the four core parameters to solve for the missing one.
Cycle Metrics (Days)
Cash Conversion Cycle Formulas
The CCC is derived from the Operating Cycle (OC) and Days Payable Outstanding (DPO):
Cash Conversion Cycle (CCC):
$$CCC = OC – DPO$$Where $OC = DIO + DSO$. Thus:
$$CCC = DIO + DSO – DPO$$ Formula Source: InvestopediaVariables Explained (Q, F, P, V – Parameters)
- $OC$ (Operating Cycle, $Q$): Days to sell inventory and collect cash from sales ($DIO + DSO$).
- $DPO$ (Days Payable Outstanding, $F$): Days a company takes to pay its own suppliers (a financing offset).
- $CCC$ (Cash Conversion Cycle, $P$): The net time cash is tied up in operations.
- $DIO$ (Days Inventory Outstanding, $V$): Days to sell inventory. (Auxiliary/Component of OC).
Related Working Capital and Liquidity Calculators
Analyze how well your business manages its liquidity and cash flow:
- Operating Cycle Calculator
- Days Inventory Outstanding (DIO) Calculator
- Days Sales Outstanding (DSO) Calculator
- Quick Ratio Calculator
What is the Cash Conversion Cycle (CCC)?
The **Cash Conversion Cycle (CCC)** is a metric that expresses the number of days it takes for a company to convert its resource inputs into cash flows. It is a refinement of the Operating Cycle, factoring in the credit terms a company receives from its suppliers (Days Payable Outstanding, $DPO$). Essentially, CCC measures how quickly a company recovers cash spent on inventory and operations.
A lower CCC is generally highly favorable, and a negative CCC is ideal (meaning the company sells its product and collects payment before it has to pay its suppliers). A high CCC suggests that cash is tied up in the business for too long, potentially forcing the company to seek external financing for working capital needs.
How to Calculate Cash Conversion Cycle (Example)
Assume a company has an Operating Cycle ($OC$) of 75 days (45 DIO + 30 DSO) and a Days Payable Outstanding ($DPO$) of 40 days. We solve for the Cash Conversion Cycle ($CCC$):
- Step 1: Calculate the difference between Operating Cycle and Days Payable Outstanding
$$CCC = OC – DPO$$
- Step 2: Calculate the Cash Conversion Cycle Time
$$CCC = 75 \text{ days} – 40 \text{ days} = \mathbf{35 \text{ days}}$$
The company takes $\mathbf{35 \text{ days}}$ to recoup the cash spent on its operations.
Frequently Asked Questions (FAQ)
Yes. A negative CCC is excellent and means the company receives cash from sales before it has to pay its own suppliers. Companies like Amazon and Dell have historically achieved negative CCCs.
The CCC is a powerful proxy for management efficiency. Companies with a low or improving CCC demonstrate superior working capital management, which often translates to higher profitability and lower reliance on short-term borrowing.
$DIO$ (Days Inventory Outstanding) is a component of the Operating Cycle ($OC = DIO + DSO$). Since $CCC = OC – DPO$, $DIO$ directly influences $CCC$. Reducing $DIO$ (selling inventory faster) shortens the $CCC$ and improves cash flow.
A company can improve its CCC by reducing $DIO$ (speed up inventory sales), reducing $DSO$ (collect receivables faster), or increasing $DPO$ (pay suppliers slower, without incurring penalties).