Module I· Working Capital & NWCBasic
Question
What is the cash conversion cycle (CCC)?
Answer
Formula
```
CCC = DSO + DIO − DPO
```
| Component | Formula | Meaning |
|---|---|---|
| DSO | AR / Sales × 365 | days for customers to pay |
| DIO | Inventory / COGS × 365 | days in inventory |
| DPO | AP / COGS × 365 | days to pay suppliers |
Example
DSO 60, DIO 90, DPO 45 → CCC = 105 days.
| Industry | CCC |
|---|---|
| Tech / SaaS | often negative |
| Industrials | 60–120 days |
| Retail (Amazon, Aldi) | negative |
Pitch tip
cutting the CCC is a classic PE lever — 30 days at a $500m-sales middle-market company frees up ~$40m of cash.