What does the cash conversion cycle (CCC) measure in a company?

The cash conversion cycle (CCC) is a critical financial metric that measures how efficiently a company manages its working capital. Specifically, it indicates the speed at which a company can convert its inventory into cash. The CCC specifically tracks the time taken for a company to purchase inventory, sell it, and collect receivables from those sales.

Understanding the cash conversion cycle is essential for managing cash flow, as it highlights how long a company’s cash is tied up in the production and sales process. A shorter CCC implies that a company is able to quickly convert its investments in inventory back into cash, which is advantageous for maintaining liquidity and reducing the need for external financing.

The other options do not accurately capture the purpose of the cash conversion cycle. The total duration of all current liabilities relates to a company's obligations, while total cash reserves reflect the amount of cash on hand rather than the efficiency of cash flow processes. Additionally, employee productivity is unrelated to the cash conversion cycle, focusing instead on workforce performance.