Cash conversion cycle

In management accounting, the Cash conversion cycle (CCC) measures how long a firm will be deprived of cash if it increases its investment in inventory in order to expand customer sales.[1] It is thus a measure of the liquidity risk entailed by growth.[2] 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.[3]

  1. ^ Cash Conversion Cycle (Operating Cycle)
  2. ^ Cash and Working Capital Management Archived October 29, 2013, at the Wayback Machine
  3. ^ "10 Top Financial Challenges for Small Businesses and How to Overcome Them". netSuite.com.