Module IV· Cash FlowBasic
Question
What is the 'cash conversion ratio' and which values are realistic?
Answer
Formula
```
CCR = (EBITDA − Capex) / EBITDA
```
Measures how much EBITDA is left as 'real' cash after maintenance and growth investment.
| Sector | CCR range |
|---|---|
| Software / SaaS | 80-95% |
| Healthcare services | 75-90% |
| Industrial middle-market | 60-75% |
| Machinery / capital goods | 55-70% |
| Auto / construction | 45-65% |
| Heavy industry | 30-50% |
Consequence
a 30%+ gap between reported and peer-typical CCR = a warning sign (often aggressive Capex tuning before a sale).