Question
The cash conversion cycle is calculated
as:Solution
The Cash Conversion Cycle (CCC) measures how long a company's cash is tied up in working capital. DIO (Days Inventory Outstanding) is the time to sell inventory. DSO (Days Sales Outstanding) is the time to collect receivables. DPO (Days Payable Outstanding) is the time to pay suppliers. The formula is: CCC = DIO + DSO - DPO. You add the days your cash is tied up (DIO and DSO) and subtract the days you delay payment to suppliers (DPO).
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