Cash Conversion Cycle Definition And Overview

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One of the roles of the Chief Financial Officer (CFO) is to establish key performance metrics to assist senior management in gauging the operating performance of the company.

The company’s Cash Conversion Cycle (CCC) or Day Working Capital (DWC) should be included for the following reasons:

  • it is actually another simple way of looking at working capital management,
  • by improving CCC, we are able to balance sales growth with the required liquidity to fuel the growth,
  • with an adverse CCC, survival of the company is at stake particularly when the company is overtrading and recession is around.

Is the CCC a new thing?

No, the CCC’s existence is as old as when accountants were looking into ways of how to reduce or manage the dollars tied up in the working capital of accounts receivable and stocks and optimizing the period owing to accounts payables.

WHAT IS CASH CONVERSION CYCLE?

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