In management accounting, the Cash Conversion Cycle (CCC) measures how long a firm will be deprived of cash if it increases its investment in resources in order to expand customer sales. It is thus a measure of the liquidity risk  entailed by growth. However, shortening the CCC creates its own risks: while a firm could even achieve a negative CCC by collecting from customers before paying suppliers, a policy of strict collections and lax payments is not always sustainable.

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{{{
CCC =  # days between disbursing cash and collecting cash in connection with undertaking a discrete unit of operations.
 
= 	Inventory conversion period + Receivables conversion period – Payables conversion period 
= 	Avg. Inventory COGS / 365 + Avg. [[Accounts Receivable]] Credit Sales / 365 – Avg. [[Accounts Payable]] [[COGS]] / 365
}}}

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bag
finance_public
created
Fri, 04 Mar 2011 09:18:02 GMT
creator
dirkjan
modified
Fri, 04 Mar 2011 09:18:02 GMT
modifier
dirkjan
tags
Accounting
M9
Term
creator
dirkjan