June 2017


By Warren Shoen


Term of the Month

By Ny Lee

Cash Conversion Cycle (CCC)

The cash conversion cycle (“CCC”) measures how long cash is tied up in working capital and in general provides an indication of how efficiently a company manages its inventory, receivables and payables.  While working capital measures how much liquidity a company is expected to have over the next year, the CCC tracks the flow of inventory and receivables into cash.  The calculation of the CCC is the summation of three separate liquidity indicators, calculated as follows:

  • CCC = Day Sales Outstanding + Days of Inventory Outstanding – Days of Payables Outstanding
    • DSO = Average Accounts Receivable / Revenues per day
    • DIO = Average Inventory / Cost of Goods per day
    • DPO = Average Payables / Cost of Goods per dayThe lower the CCC (typically measured in days), the faster inventory can be converted into cash. Generally, CCC is a positive number, but for some, such as Amazon, CCC is actually negative (-30 days) due to its size and ability to command longer payment terms with its vendors. Comparatively, here are the CCC measurements of some of the leading U.S. retailers, based on their fiscal 2016 financials:
      • (days)     Amazon     Target     Walmart     Best Buy
      • DSO             19                 2                4               12
      • DIO             45               63              44              60
      • DPO            95               55               40              57
      • CCC            -31               10                 8              15

Sources: Investopedia, Forbes, Chron


Bits & Pieces

By Jeff Torrison

  • Minnesota native George Akerson was the first official presidential press secretary, serving Herbert Hoover from 1929 to 1931 when Akerson left government service to work for Paramount Pictures. Akerson began his career as a reporter for the Minneapolis Tribune.
  • Benjamin Franklin performed his famous kite flying experiment during a thunderstorm in June of 1752 in which collected an electrical charge in a jar. He later invented the lightning rod for protecting buildings and ships.
  • Warren G. Harding was the first president to have a speed broadcast over the radio in 1922 during the dedication of a memorial site for Francis Scott Key, the composer of “The Star Spangled Banner.”
  • The Roman Colosseum, also known as the Flavian Amphitheatre, had 6.3 million visitors in 2016 making it the most popular tourist attraction in Rome.
  • There are 252 different languages spoken in the homes of Minnesota public school children according to a June 1, 2017, Minnesota Public Radio report.