What would be a proper response to the below two posts?

Post 1

Cash Conversion Cycle: the amount of time that passes between when a company spends money to buy an item and when they receive the money for selling it (Misamore, 2016). The Cash conversion cycle (CCC) equation = days inventory+ days receivables - days payable. For a business like Audio Partners, we will take the average number of days its products are in stock, and we will add the number of days it takes to sell the stock. Next, Audio Partner will subtract the average number of days before paying the expense for the product. Normally, businesses will receive the product or inventory (food, drinks, devices etc.) The business will pay later for what was received; once the inventory is sold, the payment is received.

CCC is important for all businesses, regardless of size and tenure. A CCC, for example, is a company that buys or makes a product for X dollars. The business sells the product for x+$10 to ensure a profit. If that business has ccc for a week, it has lost x amount of income and hasn't made a profit, and if the business is depending on that profit, it can affect its future inventory. The goal is for businesses to convert their investments into cash and have the lowest CCC possible. CCC shows investors how long it takes for a company to convert invested funds from operations to cash.

Using the rations of accounts payable (AP), sales and accounts receivables (AR). Using financial statements to understand and find the ending accounts payable, annual revenue, accounts receivable balance, average inventory over the period and cost of goods sold. The smaller the days of CCC is determined by the days of inventory outstanding (DIO).

Csu Global. (2025). MBA 530: Financial Decision Making

Word of the week: Cash conversion cycle: HBS Online. Business Insights Blog. (2016, July 26). https://online.hbs.edu/blog/post/word-of-the-week-cash-conversion-cycle

Post 2

The Cash Conversion Cycle (CCC) is a measurement that shows how quickly a company can turn its capitals into cash. Its like tracking how long it takes for a company to spend money on products, sell those products, and then collect payment. This cycle is important because businesses need to manage their cash effectively to stay successful. The CCC consists of three main parts: Days Inventory Outstanding (DIO), which is the average number of days it takes to sell inventory; Days Sales Outstanding (DSO), which is the average number of days it takes to collect payment after a sale; and Days Payable Outstanding (DPO), which is the average number of days the company takes to pay its suppliers. The formula to calculate this is: CCC = DIO + DSO - DPO.

A shorter Cash Conversion Cycle is generally better because it means the company is efficient at turning inventory into cash. Companies with a short CCC don't have their money tied up in products sitting on shelves or in unpaid customer bills for very long. Having a good CCC helps companies in several ways: they have enough cash available for daily operations, they don't need to borrow as much money from banks, and they can make more profit because they're using their resources efficiently. Some companies like Amazon have mastered this process so well that they have a negative CCC. This happens because Amazon receives payments from customers before they even must pay their suppliers. This gives Amazon extra cash to use for growth and other business needs.

Other large retailers like Walmart and Target carefully watch their CCC to make sure they're buying the right amount of inventory and optimizing when they pay suppliers versus when they collect money from customers. By managing inventory turnover rates and negotiating favorable payment terms with suppliers, these companies can improve their cash flow positions. Understanding the Cash Conversion Cycle is important for seeing how well a company manages its resources and predicting its financial health in the future. Companies that manage their CCC well, outperform competitors because they can work with less external financing and respond more quickly to market changes.

Reference Hayes, A. (2024, July 25). What Is the Cash Conversion Cycle (CCC)? Retrieved from InvestopediaLinks to an external site..