What is The Cash Conversion Cycle - CCC?

Investors Trading Academy
Investors Trading Academy
52.1 هزار بار بازدید - 8 سال پیش - Welcome to the Investors Trading
Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Cash Conversion Cycle - CCC” The cash conversion cycle is the theoretical amount of time between a company spending cash and receiving cash per each sale, output, unit of operation, etc. It is basically a measure of how long cash is tied up in working capital. The CCC is a great way to analyze the efficiency of the organization in managing cash to generate more sales. In management accounting, the Cash conversion cycle measures how long a firm will be deprived of cash if it increases its investment in resources in order to expand customer sales. It is thus a measure of the liquidity risk entailed by growth. However, shortening the CCC creates its own risks: while a firm could even achieve a negative CCC by collecting from customers before paying suppliers, a policy of strict collections and lax payments is not always sustainable. The cash conversion cycle involves determining how long it takes to create inventory, sell inventory and collect on invoices to customers. Changes in cash conversion cycle can be very telling. For example, when companies take an extended period of time to collect on outstanding bills, or they overproduce due to poor estimations, their cash conversion cycles lengthen. For small businesses especially, long cash conversion cycles can mean the difference between profit and bankruptcy. After all, companies can only pay for things with cash, not profits. In turn, the net operating cycle is a measure of managerial competency as well as operational efficiency. It is important to note that different industries have different capital requirements and standards, and determining whether a company has a long or short cash conversion cycle should be made within that context. By Barry Norman, Investors Trading Academy - ITA
8 سال پیش در تاریخ 1395/03/12 منتشر شده است.
52,111 بـار بازدید شده
... بیشتر