Cash Conversion Cycle
Calculate the Cash Conversion Cycle, which measures the amount of time it takes for a company to convert its investments in inventory and accounts receivable into cash, while considering the time it takes to pay its accounts payable. This ratio is also known as Cash-to-Cash Cycle (C2C) or Net Operating Cycle.
The Cash Conversion Cycle (CCC) is an important measure of a company’s liquidity management and efficiency in managing its working capital. It takes into account the time it takes to sell inventory, collect payments from customers, and pay suppliers. A shorter CCC indicates that a company is able to quickly convert its investments into cash, which can be a positive sign of efficient operations.
The formula is as follows:
\[\text{Cash Conversion Cycle} = \text{Days of Sales in Inventory} + \text{Days of Sales Outstanding} - \text{Days of Accounts Payable Outstanding}\]A negative cash conversion cycle means suppliers are paid after customers have paid, so growth releases cash instead of absorbing it; large retailers and platforms with strong buying power are the usual examples. Read the cycle through its three parts (get_days_of_inventory_outstanding, get_days_of_sales_outstanding and get_days_of_accounts_payable_outstanding), because a shorter cycle bought by stretching suppliers is less durable than one from faster-moving inventory.
Also known as: CCC.
Cash Conversion Cycle in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_cash_conversion_cycle as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["AMZN", "COST", "WMT"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_cash_conversion_cycle()
Or, after setting up the Finance Toolkit MCP, ask:
What was the cash conversion cycle of Amazon, Costco and Walmart from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| AMZN | -41.1953 | -30.918 | -27.9651 | -31.7282 | -42.2411 |
| COST | -1.1462 | 1.4176 | 2.7455 | 2.2723 | 2.071 |
| WMT | 3.463 | 6.4477 | 5.0509 | 3.5502 | 3.216 |
Parameters
get_cash_conversion_cycle accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
days | int | float | The number of days in the window the flows cover. Defaults to None, which uses 365 for annual data and 365 / 4 for quarterly data, multiplied by trailing when set (e.g. 365 for quarterly data with trailing=4). | 360 |
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of periods to sum flows (income and cash flow statement items) over, with balance sheet items averaged over the same number of period ends. E.g. 4 with quarterly data gives the trailing twelve months (TTM) and 3 with annual data a three-year cumulative figure. Defaults to None, which uses single-period flows (per quarter and not annualized with quarterly data). | 4 |