Cash conversion cycle: Difference between revisions
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imported>Doug Williamson (Explain calculation.) |
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''Financial ratio analysis - management efficiency ratios.'' | |||
(CCC). | (CCC). | ||
The cash conversion cycle indicates how long it takes a company to convert cash outflows into cash inflows. | |||
For example in a manufacturing firm, the average length of time between payment for raw materials and other inputs, and the receipt of cash from the firm's customers. | For example in a manufacturing firm, the average length of time between payment for raw materials and other inputs, and the receipt of cash from the firm's customers. | ||
The shorter the time, the less funding a company has to find. | The shorter the time, the less funding a company has to find. | ||
The cash conversion cycle is calculated as: | |||
Days inventory outstanding | |||
ADD Days receivables outstanding | |||
LESS Days payables outstanding | |||
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* [[Cashflow statement]] | * [[Cashflow statement]] | ||
* [[CertICM]] | * [[CertICM]] | ||
* [[Days inventory outstanding]] | |||
* [[Days payables outstanding]] | |||
* [[Days sales outstanding]] | |||
* [[Management efficiency ratio]] | |||
* [[Order to cash cycle]] | * [[Order to cash cycle]] | ||
* [[Purchase to pay cycle]] | * [[Purchase to pay cycle]] | ||
[[Category:Cash_management]] | [[Category:Cash_management]] | ||
Revision as of 18:31, 3 February 2019
Financial ratio analysis - management efficiency ratios.
(CCC).
The cash conversion cycle indicates how long it takes a company to convert cash outflows into cash inflows.
For example in a manufacturing firm, the average length of time between payment for raw materials and other inputs, and the receipt of cash from the firm's customers.
The shorter the time, the less funding a company has to find.
The cash conversion cycle is calculated as:
Days inventory outstanding
ADD Days receivables outstanding
LESS Days payables outstanding
