Definition
The CCC measures how efficiently a company converts its investments in inventory and other resources into cash flows from sales. A shorter cycle means faster cash generation. Negative CCCs (like Dell's or Amazon's) indicate the company collects from customers before paying suppliers—an extremely efficient model.
functions Formula
CCC = Days Inventory Outstanding + Days Sales Outstanding − Days Payable Outstanding
lightbulb Example
DIO = 45 days, DSO = 30 days, DPO = 40 days. CCC = 45 + 30 - 40 = 35 days. Each operating cycle ties up cash for 35 days.
verified_user Key Points
- Shorter CCC indicates better capital efficiency
- Negative CCC is ideal—you get paid before paying suppliers
- Seasonal businesses have fluctuating CCCs
- Compare CCC trends within same industry