cash conversion cycle


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Related to cash conversion cycle: Operating cycle, Days Sales Outstanding

Cash conversion cycle

The length of time between a firm's purchase of inventory and the receipt of cash from accounts receivable.

Cash Conversion Cycle

The time between an expenditure of money to make a product and the collection of accounts receivable from the sale of that product. Obviously, a shorter cash conversion cycle is preferable. A longer cash conversion cycle may indicate a current or potential problem with cash flow.

cash conversion cycle

The time required for a business to turn purchases into cash receipts from customers. A short cycle allows a business to quickly acquire cash that can be used for additional purchases or debt repayment.
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The purpose of effective WCM is to reduce cash conversion cycle (CCC) to the acceptable optimal point which suites firm's requirement (Hager, 1976).
Shortening the cash conversion cycle also leads to improved profitability.
The length of cash conversion cycle is used to measure the impact of accounts receivable, inventories and payments to supplier on the firm's profitability, cash conversion cycle assist in measuring the performance and current assets management of the firm's (Uyar, 2009).
They reported that there was a significant evidence of a negative relationship between gross profit and cash conversion cycle.
Shin and Soenen (1998), in an anecdotal example, utilize a variable, the Net Trade Cycle (NTC), which expresses the three components of the cash conversion cycle as a percentage of sales.
This is followed by the development of hypotheses around the relationships between cash conversion cycle and capital requirements, liquidity, and returns, and how this may change over time.
Calculate the company's cash conversion cycle for 2005, 2006 and 2007.
1996) examined the relationship between aggressive working capital management and profitability of US firms using Cash Conversion Cycle (CCC) as a measure of working capital management where a shorter CCC represents the aggressiveness of working capital management.
Going on prepaid terms drastically impacts their cash conversion cycle.