Editing Cash conversion cycle (section)

{{Short description|Length of time it takes a company to convert resource inputs to cash flows}}
{{Accounting}}
In [[management accounting]], the '''Cash conversion cycle''' ('''CCC''') measures how long a firm will be deprived of cash if it increases its investment in inventory in order to expand customer sales.<ref>[http://www.readyratios.com/reference/asset/cash_conversion_cycle.html Cash Conversion Cycle (Operating Cycle)]</ref> It is thus a measure of the [[liquidity risk]] entailed by growth.<ref>[http://www.bus.iastate.edu/campcj/fin310/Ch22_Liquidity_Mngmt_EFS_e3.ppt Cash and Working Capital Management] {{webarchive |url=https://web.archive.org/web/20131029213530/http://www.bus.iastate.edu/campcj/fin310/Ch22_Liquidity_Mngmt_EFS_e3.ppt |date=October 29, 2013 }}</ref> However, shortening the CCC creates its own risks: while a firm could even achieve a negative CCC by collecting from customers before paying suppliers, a policy of strict collections and lax payments is not always sustainable.