CCC
Cash Conversion Cycle
Short definition
The cash conversion cycle is how many days cash stays in the operating cycle after supplier credit. CCC = DIO + DSO − DPO.
Detailed explanation
The operating cycle is DIO + DSO; CCC subtracts DPO and makes supplier funding visible. A negative CCC is not an error: cash can arrive before suppliers are paid (some retail and digital models).
CCC is a time measure, not a funding amount. The same CCC at higher sales means a larger OWC amount. The cash effect of a one-day improvement uses COGS/day for inventory, sales/day for receivables and purchases/day for payables — separately.
Why it matters for the CFO
It is the single cash summary of collection, inventory and payment policy. A growth budget that ignores CCC ends a profitable year in a cash gap. Short-term facilities often fund this cycle.
How it is calculated
CCC = DIO + DSO − DPO
Compute all three on the same day-count (365 or 360). DIO uses COGS, DSO sales, DPO purchases or COGS by policy; mixing bases breaks CCC.
Variables in the formula
- CCC: Cash conversion cycle (days)
- DIO: Days inventory outstanding
- DSO: Days sales outstanding
- DPO: Days payable outstanding
How to read it
A longer CCC ties cash; a shorter CCC releases it — at constant volume. Volume up with CCC flat still grows the amount. There is no universal “good CCC”; business model, season and bargaining power set it. The firm sets targets; a fake sector average is not a decision metric.
Numerical example
DIO 50 days, DSO 40 days, DPO 30 days → CCC = 50 + 40 − 30 = 60 days.
Related calculators
Güven Sayılgan’s writing on this topic
The Working-Capital Illusion: Growing Sales While Going Broke
Rising sales are often treated as a success indicator; in financial management, however, turnover and cash are not the same thing, and growth that cannot be fin
4 min read
Read → FinansWhat Does Ageing of Receivables Mean?
Ageing of receivables classifies trade receivables by due date and days overdue. What matters is not the total balance, but how much is overdue and carries coll
3 min read
Read → FinansWhen Do Firms in Türkiye Experience Cash Squeezes Most Often?
Cash squeezes are not driven by tax dates alone; interest rates, banks’ appetite to lend, the exchange rate, inventory costs, collection periods, and sales temp
3 min read
Read →Read these first
Related terms
What to learn next
Definitions are educational. They are not investment, credit or tax advice.