Enter the days of inventory outstanding, days of sales outstanding, and days payables outstanding to determine the cash conversion lifecycle.

## Cash Conversion Cycle Formula

The following formula is used to calculate the cash conversion lifecycle.

CCC= DIO + DSO – DPO

- Where CC is the cash conversion time
- DIO is the days of inventory outstanding
- DSO is the days sales outstanding
- DPO is the days payables outstanding

## Cash Conversion Cycle Definition

A cash conversion cycle is defined as the time it takes money spent to convert into a cash flow from sales.

## Cash Conversion Cycle Example

How to calculate cash conversion cycle?

**First, determine the days of inventory outstanding.**This is the average number of days a produced good stays in inventory on average before being sold.

**Next, determine the days sales outstanding.**This is the average number of days it takes a company to collect on previously sold goods or services.

**Next, determine the days payable outstanding.**This is the number of days it takes the company to pay its own obligations associated with the resources used to produce the good.

**Finally, calculate the cash conversion time.**Using the formula you can calculate the cash conversion cycle.

## FAQ

**What is the cash conversion cycle?**

A cash conversion cycle is a measure of the time in days that it takes for a company to convert it’s money spent on resources into cash flows from sales.