Result
Cash Conversion Cycle
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
DIO (Days Inventory Outstanding) = inventory ÷ COGS × 365 — how many days on average inventory sits before it's sold. DSO (Days Sales Outstanding) = accounts receivable ÷ revenue × 365 — how many days on average customers take to pay after a sale.
DPO (Days Payables Outstanding) = accounts payable ÷ COGS × 365 — how many days on average the business has before it actually has to pay suppliers.
CCC = DIO + DSO − DPO — how many days the business's own cash is tied up in the operating cycle: money goes out to buy inventory and sits there, then waits some more to be collected from customers, and supplier payment terms only partly offset that gap.
The shorter the CCC, the less of its own cash a business needs for working capital — some high-turnover retailers with generous supplier terms achieve a negative CCC: cash comes in from customers before suppliers need to be paid, so working capital is effectively financed by trading partners rather than the business itself.