How many days cash spends in inventory and receivables before it comes back, net of the time suppliers give you to pay.
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The cash conversion cycle (CCC) counts the days between paying for stock and collecting cash from the customers who buy it. It adds how long inventory sits (days inventory outstanding, DIO) to how long customers take to pay (days sales outstanding, DSO), then subtracts how long you take to pay suppliers (days payable outstanding, DPO). Enter the three day counts if you have them, or switch to the statements mode and enter inventory, receivables, payables, revenue and cost of goods sold from the balance sheet and income statement. The guide below works one company through both routes, shows how much cash a shorter cycle releases, and compares typical cycles across sectors.
Choose day counts if you already know DIO, DSO and DPO, or the statements mode to work them out.
Statements mode: enter year-end (or average) inventory, receivables and payables, and the year's revenue and cost of goods sold.
Press Calculate to see the cycle in days and, in statements mode, the cash each day of the cycle ties up.
By O.E. — Partner, chairman of the board and CEO of a metal products manufacturer for 21 years; the company exports to 45 countries.
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CCC = DIO + DSO − DPO. Inventory and payables are divided by cost of goods sold because both are carried at cost; receivables are divided by revenue because invoices include the margin. Use 365 for a year of figures, 90 for a quarter. Balance-sheet figures are a snapshot; for a seasonal business, average the opening and closing balances.
| Symbol | Meaning |
|---|---|
| DIO | Inventory ÷ cost of goods sold × days — days stock waits before it is sold |
| DSO | Accounts receivable ÷ revenue × days — days customers take to pay |
| DPO | Accounts payable ÷ cost of goods sold × days — days you take to pay suppliers |
1Revenue $10.95 million, cost of goods sold $7.3 million; year-end inventory $1.2 million, receivables $0.9 million, payables $0.8 million.
DIO = 1.2 ÷ 7.3 × 365 = 60.0 · DSO = 0.9 ÷ 10.95 × 365 = 30.0 · DPO = 0.8 ÷ 7.3 × 365 = 40.0
CCC = 50.0 days
The distributor spends about $20,000 a day on cost of goods ($7.3 million ÷ 365). Every day taken off the cycle frees roughly that amount of cash: negotiating supplier terms from 40 to 50 days releases about $200,000 once, without any change in sales.
2Day counts entered directly: 60 DIO, 45 DSO, 35 DPO; and a lean operation with 20, 15 and 30.
60 + 45 − 35 · 20 + 15 − 30
70.0 days · 5.0 days
Sector averages from Aswath Damodaran's January 2026 US dataset, converted to days (ratio × 365). His inventory and payables ratios are expressed against sales rather than cost of goods, so these are approximations that understate DIO and DPO for low-margin sectors.
| Sector (number of firms) | Receivables | Inventory | Payables | Approx. CCC |
|---|---|---|---|---|
| Retail, general (23) | 12.8 | 31.6 | 43.4 | ≈ 1 day |
| Grocery and food retail (15) | 6.4 | 20.0 | 21.6 | ≈ 5 days |
| Auto and truck (33) | 23.0 | 36.2 | 50.9 | ≈ 8 days |
| Software (309) | 61.5 | 1.7 | 30.5 | ≈ 33 days |
| Semiconductors (66) | 58.0 | 54.6 | 25.4 | ≈ 87 days |
| Machinery (105) | 69.5 | 60.7 | 36.2 | ≈ 94 days |
Retailers collect cash at the till and pay suppliers later, so their cycle is close to zero; machinery makers hold work in progress and sell on credit terms. Compare a company with its own sector and its own past.
A negative CCC means customers pay before suppliers have to be paid: suppliers finance the operating cycle. It is a strength while sales grow, and a risk when they fall, because the supplier credit shrinks just as cash is needed. A negative number can also come from stretching suppliers beyond agreed terms, which shows up later as lost discounts or tighter credit.