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Cash Conversion Cycle Formula

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The Cash Conversion Cycle, also known as the cash cycle is a metric expressing how many days it takes a company to convert the cash it spends on inventory back into cash by selling its product. Check FAQs

CCC = DIO + DSO - DPO

CCC - Cash Conversion Cycle?DIO - Days Inventory Outstanding?DSO - Days Sales Outstanding?DPO - Days Payables Outstanding?

Cash Conversion Cycle Example

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Here is how the Cash Conversion Cycle equation looks like with Values.

Here is how the Cash Conversion Cycle equation looks like with Units.

Here is how the Cash Conversion Cycle equation looks like.

65 = 70 + 10 - 15

65 = 70 + 10 - 15

65 = 70 + 10 - 15

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Cash Conversion Cycle Solution

Follow our step by step solution on how to calculate Cash Conversion Cycle?

FIRST Step Consider the formula

CCC = DIO + DSO - DPO

Next Step Substitute values of Variables

∴

CCC = 70 + 10 - 15

Next Step Prepare to Evaluate

∴

CCC = 70 + 10 - 15

LAST Step Evaluate

∴

CCC = 65

Cash Conversion Cycle Formula Elements

Variables

Cash Conversion Cycle

The Cash Conversion Cycle, also known as the cash cycle is a metric expressing how many days it takes a company to convert the cash it spends on inventory back into cash by selling its product.

Symbol: CCC

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Cash Conversion Cycle

Days Inventory Outstanding

Days Inventory Outstanding (DIO) is the average number of days that a company holds its inventory before selling it.

Symbol: DIO

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Days Inventory Outstanding

Days Sales Outstanding

Days Sales Outstanding represents the collection efficiency of credit sales and measures the average number of days a company takes to collect cash from credit sales.

Symbol: DSO

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Days Sales Outstanding

Days Payables Outstanding

Days Payables Outstanding calculates the average number of days a company takes to pay its suppliers.

Symbol: DPO

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Days Payables Outstanding

Other formulas in Cash Management category

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C = \sqrt{\frac{2 \cdot b \cdot t}{R}}

Go Miller Orr Model

Z = 3 \cdot {(\frac{3 \cdot b \cdot σ}{4 \cdot \frac{R}{360}})}^{\frac{1}{3}}

Go Cash Coverage

Cash cov = \frac{EBIT}{Int}

How to Evaluate Cash Conversion Cycle?

Cash Conversion Cycle evaluator uses Cash Conversion Cycle = Days Inventory Outstanding+Days Sales Outstanding-Days Payables Outstanding to evaluate the Cash Conversion Cycle, The Cash Conversion Cycle formula is defined as a metric expressing how many days it takes a company to convert the cash it spends on inventory back into cash by selling its product. Cash Conversion Cycle is denoted by CCC symbol.

How to evaluate Cash Conversion Cycle using this online evaluator? To use this online evaluator for Cash Conversion Cycle, enter Days Inventory Outstanding (DIO), Days Sales Outstanding (DSO) & Days Payables Outstanding (DPO) and hit the calculate button.

FAQs on Cash Conversion Cycle

What is the formula to find Cash Conversion Cycle?

The formula of Cash Conversion Cycle is expressed as Cash Conversion Cycle = Days Inventory Outstanding+Days Sales Outstanding-Days Payables Outstanding. Here is an example- 65 = 70+10-15.

How to calculate Cash Conversion Cycle?

With Days Inventory Outstanding (DIO), Days Sales Outstanding (DSO) & Days Payables Outstanding (DPO) we can find Cash Conversion Cycle using the formula - Cash Conversion Cycle = Days Inventory Outstanding+Days Sales Outstanding-Days Payables Outstanding.

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Cash Conversion Cycle Formula

Cash Conversion Cycle Example

Cash Conversion Cycle Solution

Cash Conversion Cycle Formula Elements

Other formulas in Cash Management category

How to Evaluate Cash Conversion Cycle?

FAQs on Cash Conversion Cycle

Variable Name