This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
Calculation: CCC = DIO + DSO - DPO
Example: The Round Number CompanyThe values are calculated for each term under their individual listings. DIO = Days Inventory Outstanding = 227 Days DSO = Days Sales Outstanding (DSO)= 73 Days DPO = Days Payable Outstanding = 91 Days Cash Conversion Cycle = 227 + 73 - 91 = 209 Days |
This metric takes into account how much time the company needs to sell its Inventory, how much time it takes to collect Receivables, and how much time it has to pay its bills (Payables). A lower number is preferred.
| For a DIY Cash Conversion Cycle Calculator, go here. |
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.