Cash conversion cycle

The Cash Conversion Cycle (CCC) measures how many days elapse between paying suppliers and collecting cash from customers — the net funding period of the operating cycle. CCC = DSO (Days Sales Outstanding) + DIO (Days Inventory Outstanding) - DPO (Days Payable Outstanding). A shorter CCC indicates better working capital management; a negative CCC (e.g. retail, SaaS) means customers pay before suppliers are paid — a structural cash generation advantage. In financial due diligence, CCC trend analysis reveals operational deterioration and benchmarking against sector peers identifies competitive working capital positions.

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Example: a Swiss industrial company presents DSO 58 days + DIO 42 days - DPO 35 days = CCC of 65 days — meaning it must fund 65 days of revenue in permanent working capital. At CHF 30.0 million revenue, this translates to CHF 5.3 million of structural working capital funding. A sector peer with CCC of 45 days requires only CHF 3.7 million — the CHF 1.6 million difference represents the relative working capital efficiency gap to close post-acquisition.

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Hectelion analyses CCC components and trends in every due diligence, benchmarking them against sector peers to identify structural working capital inefficiencies.