Question

In: Operations Management

Given the current business environment, as a company how important is knowing your CCC? Be specific.

Given the current business environment, as a company how important is knowing your CCC? Be specific.

Solutions

Expert Solution

PLEASE RATE POSITIVE IF YOU LIKE MY ANSWER TO ENCOURAGE MY EMPLOYMENT

Cash conversion cycle refers to the amount of time it takes for a business to convert into cash the investment that it made on its inventory. That is, it is the time difference between inflow and outflow of cash. Knowing the cash conversion cycle, business can estimate its cash requirements to run the business operations without disruption. A business with long CCC will need more money in hand because it needs to keep investing in inventory before the long before the previous investment is released through sales. If the CCC is short, then businesses needn't wait much for the money to be released from the inventory through sales.

During current COVID situations, inventory may not move as fast and customers may not pay on time. This may mean that CCC is going to extend and the business may need additional working capital.


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