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It is true that the cash conversion cycle is the net period from the start of cash outflow for producing a product or service until the associated cash inflow materializes from the sale of that product or service.
What is the cash conversion cycle?
The cash conversion cycle (CCC) is a metric that measures the amount of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. The CCC is an important indicator of a company’s ability to manage its resources and generate cash flows from its activities. It is calculated by adding the number of days it takes to convert inventory into cash (days inventory outstanding, DIO), the number of days it takes to convert receivables into cash (days sales outstanding, DSO), and the number of days it takes to pay off payables (days payable outstanding, DPO). The CCC can also be referred to as the operating cycle or the working capital cycle.
The cash conversion cycle is the period between when a company pays its suppliers for goods and services and when it collects money from its customers for its products and services. It is a measure of how quickly cash flows in and out of a business. It is an important metric for businesses to understand and manage to maintain healthy cash flows.
It can be concluded that it is true that the cash conversion cycle is the net period from the start of cash outflow for producing a product or service until the associated cash inflow materializes from the sale of that product or service.
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