How many days it takes to convert inventory and receivables into cash. Shorter is better. A negative cycle (like Amazon's) means the company collects cash from customers before paying suppliers.
Formula
Description
Measures how many days it takes to convert inventory and receivables investments into cash. Combines Days Sales Outstanding, Days Inventory Outstanding, and Days Payables Outstanding. Companies with shorter or negative cash conversion cycles have superior working capital management.
Interpretation
Below 60 days is generally good. Negative CCC (like Amazon) means the company collects cash from customers before paying suppliers, an extremely powerful business model. Rising CCC may signal working capital deterioration.
Related Integrity Indicators
Operating cash flow divided by total debt. Measures how quickly a company could repay all its debt from operating cash flow alone. Above 0.5 means the company could theoretically pay off all debt in two years from operations. Below 0.15 signals heavy debt relative to cash generation.
Free cash flow divided by net income. Above 1.0 means the company generates more cash than its reported profits, a hallmark of high-quality earnings. Consistently below 0.7 is a red flag.
Compares operating cash flow to net income. When cash flow exceeds earnings, the company's profits are well-supported by actual cash. This is one of the nine criteria in the Piotroski F-Score.
What percentage of revenue must be reinvested in capital assets. Below 8% is capital-light and attractive. Buffett prefers businesses that don't require large ongoing capital outlays to maintain their competitive position.
Explore More
Learn
Investing Tools
- Stock ScreenerScreen 85,000+ stocks by 120 indicators
- VM Score LeaderboardTop stocks ranked daily by VMCI
- Guru StrategiesApply Buffett, Graham, Greenblatt strategies
- DCF CalculatorCalculate intrinsic value, free
- Global MarketsMacro overview across 73 exchanges
- Stock CompareSide-by-side company comparison
Browse Stocks
- Stock Analysis HubBrowse by sector, exchange, or country
- Technology StocksTop tech stocks by intrinsic value
- Healthcare StocksTop healthcare stocks by VMCI
- Financial StocksTop financial stocks by VMCI
- Energy StocksTop energy stocks by fundamentals
- Real Estate StocksTop REIT and property stocks
- NYSE StocksBest-valued stocks on NYSE
- NASDAQ StocksTop NASDAQ stocks by VM Score
- LSE StocksTop London Stock Exchange stocks
- US StocksBest US stocks by fundamentals
- UK StocksBest UK stocks by fundamentals
- Japan StocksTop Japanese stocks by value