Question
In: Accounting
Why cash conversion cycle is important to measure company’s liquidity?
Why cash conversion cycle is important to measure company’s liquidity?
Solutions
Expert Solution
Answer:
Cash Conversion Cycle :
Cash Conversion Cycle (CCC) measures the time period between the money cost and the inflow of money for example it ascertains the quantity of days since the organization made installment to get crude materials and money got from the closeout of such products. In basic words, it quantifies the time period for which the assets are tied up in the business.
Reason of Why cash conversion cycle is important:
It is an essential metric for any organization in the assembling segment.
A business wants to see lower money change cycle since it is conductive for solid working capital dimensions, money streams, liquidity and profitability of a firm.
Individuals in financial exchange more often than not trust the intricate things to be best, yet in any case, the things which are straightforward are observed to be a superior decision for both in close to home life as well as securities exchange.
One such comparable idea we have is Cash Conversion Cycle.
Inspecting Cash Conversion Cycle is a straightforward yet extremely compelling approach to break down the productivity of organization's task.
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