Question

QCF	2009	2010	2011	2012
CCC	5	8.1	7.2	6.3

how has QFC CCC (cash conversion cycle) changed over the last few years?

Answer 1

Cash conversion cycle refers to the time taken by a firm to convert its inventory into sales and then sales to cash. Shorter the cash conversion cycle, more is the efficiency since it denotes that the firm is able to turn its inventory into cash in a shorter period of time.

As can be seen, the firm started with a better cash conversion cycle of 5 days, which spiked up to 8 days and has been going down on an average in 2011 and 2012. We can see that there are efforts being made in reducing the CCC in the last 2 years after it rose to 8.

While the table might suggest that the company is doing fairly well on this metric, its always important to note that cash conversion cycles are always relevant to a particular industry. A CCC of 8 might be best in an industry where typical cash conversion cycles range between 12-15 and the same CCC will be worst in industries like FMCG where some firms even have negative CCC.

Hence, while the industry info is not mentioned in the question, its always a good parameter to have.