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What is a cash conversion ratio?

The cash conversion ratio compares the reported net income of a company to its cash flow from operations (CFO) in a specified period. Net Income → The net income is the profits remaining after subtracting all operating costs (COGS, SG&A, R&D) and non-operating costs (e.g. interest expense, inventory write-down, income taxes).

What is cash conversion cycle (CCC)?

Cash Conversion Cycle (CCC): What Is It, and How Is It Calculated? What Is the Cash Conversion Cycle (CCC)? The cash conversion cycle (CCC), also called the net operating cycle or cash cycle, is a metric that expresses, in days, how long it takes a company to convert the cash spent on inventory back into cash from selling its product or service.

What does a high cash conversion ratio mean?

A high cash conversion ratio indicates that the company has excess cash flow compared to its net profit. For mature companies, it is common to see a high CCR because they tend to earn considerably high profits and have accumulated large amounts of cash.

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