It shows how long it takes to convert investments in inventory and other resources into cash flows from sales.
A shorter CCC indicates that a company recovers its cash faster and operates more efficiently.
Use this calculator to estimate your cash conversion cycle and analyze the relationship between inventory, receivables, and payables.
Formulas: Understanding the Cash Conversion Cycle (CCC)
The Cash Conversion Cycle (CCC) can be expressed in several equivalent forms. Each version highlights how inventory,
receivables, and payables interact in cash flow timing.
Cash conversion cycle = Days inventory outstanding + Days sales outstanding + Days payables outstanding
CCC = DIO + DSO – DPO
Cash conversion cycle (CCC) = Inventory conversion period (DIO) + Receivables conversion period (DSO) − Payables conversion period (DPO)
Cash conversion cycle = Inventory conversion period + Receivables collection period (average collection period) − Payables deferral period
Interpretation
The cash conversion cycle measures the number of days it takes to turn cash spent on inventory into cash received from customers.
A positive CCC means it takes time to recover cash, while a negative CCC indicates that the business is collecting money faster than it pays suppliers.
Example
Suppose a company has 40 days inventory outstanding (DIO), 35 days receivables outstanding (DSO), and 30 days payables outstanding (DPO).
CCC = 40 + 35 − 30 = 45 days
This means that, on average, it takes 45 days for the company to turn its investment in inventory into cash receipts.
References
Source: Wikipedia contributors, Cash conversion cycle, Wikipedia, The Free Encyclopedia, available at https://en.wikipedia.org/wiki/Cash_conversion_cycle
Accessed on November 2, 2025.
Disclaimer
The information provided on Accounting Portal is for general informational and educational purposes only and does not constitute professional accounting, tax, financial, or legal advice.
While we strive for accuracy and timeliness, no representation or warranty is made regarding completeness or reliability. Always consult a qualified professional before making any business, tax, or financial decisions.
Neither Accounting Portal nor its authors are liable for any loss or damage resulting from the use of this information.
© 2025 Accounting Portal. All rights reserved.