Financial metrics glossary
Cash conversion cycle (CCC): definition, formula and example
The cash conversion cycle (CCC) is the number of days between a company paying for the goods and services it sells and collecting the cash from its customers. It is days sales outstanding plus days inventory outstanding minus days payable outstanding.
Updated
Formula
- Cash conversion cycle = DSO + DIO − DPO
- DSO = Receivables ÷ Revenue × Days in the period
- DIO = Inventory ÷ Cost of goods sold × Days in the period
- DPO = Payables ÷ Cost of goods sold × Days in the period
Worked example
SampleSAMPLE · Northbridge Analytics, September 2026
Northbridge Analytics, the fictional software company in the Financial Analyst's public sample, at the end of September 2026. A software company holds no inventory, so days inventory outstanding is zero:
| Part | Days |
|---|---|
| Days sales outstanding (DSO) | 36 days |
| Days inventory outstanding (DIO), no inventory | 0 days |
| Days payable outstanding (DPO) | 32 days |
- DSO = $194,800 ÷ $1,957,866 × 365 = 36.3 days, 36 in whole days
- DPO = $46,466 ÷ $528,019 × 365 = 32.1 days, 32 in whole days
- Cash conversion cycle = 36 + 0 − 32 = 4 days
Cash conversion cycle: 4 days
The sample report prints this figure as the working-capital timing gap: DSO minus DPO in whole days, which is the whole cycle for a company that holds no inventory.
How to read it
- Each day of the cycle is a day of trading the business funds itself. A longer cycle ties up more cash as sales grow — which is how a profitable, growing company can run short of cash.
- A negative cycle means customers pay before suppliers are paid, so suppliers fund the trading. That lasts only as long as the payment terms on both sides do.
- Read the three parts, not only the total. The same cycle can come from fast collection and slow stock or from the reverse, and each calls for a different fix.
- Measure all three parts over the same period with the same day count, and compare cycles calculated the same way.
How small US public companies compare (FY2025 10-Ks)
- Median
- 91.2 days
- Middle half
- 9.8 days to 188.6 days
- Companies
- 253
All industries, from Ataski's study of the fiscal 2025 annual reports (Form 10-K) that non-accelerated filers with revenue of $1 million to $250 million filed with the SEC: half the companies are above the median and half below, and the middle half fall within the range shown. These are small public companies, not private businesses, so read the figures as a reference point rather than a target.
Cash conversion cycle by industry, with the method →
Source: Ataski analysis of SEC Financial Statement Data Sets (FY2025 10-K filings).
Where it shows up in the monthly management report
The report's “Working capital and cycles” table prints the cash conversion cycle with its three parts, writes out the formula and, when the cycle is positive, says roughly how much cash one day of it ties up.
The “Cash and working capital” page shows the working-capital timing gap — DSO minus DPO, in days — which is the whole cycle for a business that holds no inventory. For an online store, a retailer or a manufacturer, the workspace's Briefing screen leads with the cycle, and shows a dash rather than a figure when one of its parts is missing.
- Open the sample workspace — a fictional company's books, worked by the Financial Analyst, with its monthly report. No signup.
- The Financial Analyst — what it reads from your accounting system, what the report contains and what it costs.
- The AR Cash Collector — follows up on overdue invoices, the receivables that age and lift DSO.
Related metrics
-
Days sales outstanding (DSO)
The average number of days customers take to pay their invoices.
-
Days inventory outstanding (DIO)
The average number of days stock is held before it is sold.
-
Days payable outstanding (DPO)
The average number of days a company takes to pay its suppliers.
-
Working capital
Current assets minus current liabilities, in dollars.
-
Operating cash flow
The cash a business's day-to-day operations bring in or use up.
Frequently asked questions
What is a good cash conversion cycle?
Median 91.2 days (middle half 9.8–188.6 days), 253 companies, FY2025 10-Ks: the cash conversion cycle of small US public companies that report receivables, inventory and payables, with revenue of $1 million to $250 million and outside finance, insurance and real estate. Shorter is generally better, because less cash is tied up in trading. Compare it with your own history and with businesses that buy, hold and sell the same way.
Source: Ataski analysis of SEC Financial Statement Data Sets (FY2025 10-K filings)
Can the cash conversion cycle be negative?
Yes, when customers pay before the business pays its suppliers — where customers pay up front and suppliers give credit. The business then trades on its suppliers' money.
How do you shorten the cash conversion cycle?
Collect sooner (a lower DSO), hold less stock (a lower DIO) or pay suppliers later within the agreed terms (a higher DPO).
What is the cash conversion cycle of a business with no inventory?
Days sales outstanding minus days payable outstanding: the days between paying suppliers and being paid by customers. Days inventory outstanding is zero.