What is CCC?
The number of days it takes to convert investments in inventory into cash from sales.
Think of it like this
Like the time between paying for ingredients and getting paid for the meal you cooked - shorter means faster cash return.
Formula
CCC = DSO + DIO - DPO- DSO: Days Sales Outstanding (collection time)
- DIO: Days Inventory Outstanding (inventory holding time)
- DPO: Days Payable Outstanding (payment to suppliers)
Why it matters
- Comprehensive cash flow efficiency measure
- Lower or negative CCC is better
- Shows working capital requirements
- Amazon famously has negative CCC
What's a good value?
< 0 days
Excellent
Gets paid before paying suppliers (rare)
0-30 days
Great
Very efficient cash cycle
30-60 days
Good
Normal efficiency
> 90 days
Poor
Significant cash tied up in operations
Real-world example
Amazon's negative CCC means they receive customer payments before paying suppliers.
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