Definition
Cash Conversion Cycle
The cash conversion cycle measures how many days it takes a company to turn investments in inventory and receivables back into cash.
CCC = Days Inventory + Days Receivables minus Days Payables. It shows how long cash is tied up in the operating cycle. A shorter (or negative) CCC means the company collects from customers and turns inventory quickly while taking longer to pay suppliers, a sign of operating efficiency and pricing power.
Negative CCC businesses (some retailers, FMCG, platforms) effectively run on suppliers' money. A lengthening CCC can signal demand or collection problems. It is a key lens for judging the quality of a company's working capital management.
Related terms
- Current RatioThe current ratio measures a company's ability to pay its short-term obligations using its short-term assets — calculated as current assets divided by current liabilities.
- Working CapitalWorking capital is the money a company needs to fund day-to-day operations, calculated as current assets minus current liabilities.
- Free Cash FlowFree cash flow is the cash a company generates after meeting operating expenses and capital expenditure — the surplus it can use to pay dividends, buy back shares, cut debt or grow.
Plain-English explainer from Investdesk Investors Encyclopedia. General information, not financial advice.