Timing is everything – How to measure liquidity using the cash conversion cycle

Description

Abstract: To measure liquidity, lenders traditionally look to the balance sheet and compute the current or quick ratio. This article discusses another, lesser-known metric called the cash conversion cycle (CCC), using an example to illustrate how the CCC metric functions. The article notes that using the CCC and other liquidity benchmarks together with other tools, such as leverage, growth and profitability metrics, can help a lender gain a comprehensive risk assessment.