Difference between revisions of "Cash conversion cycle"

Revision as of 18:38, 27 August 2020

Cash conversion cycle

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-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.
+Cash conversion cycle
-<html><img src = "/static/files/MBI/Module%2012/cashconversioncalculation.PNG" width="600"/></html>
-{{{
-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
-}}}
-<html>
-<img src="/static/files/MBI/Module%209/cashconversioncycle.PNG" width=500>
-</html>
-<html>
-<img src="/static/files/MBI/Module%209/DSC08465a.JPG" width=500>
-</html>
 [[Category:finance]]