(a) Give the meaning of Cash Conversion Cycle (CCC). (b) State the relationship between the Cash Conversion Cycle (CCC) and the quantum of working capital required by a business. (c) Calculate the Gross working capital for Ojas Ltd. from the details given below : Amount (₹) i. Stock 1,00,000 ii. Debtors 2,50,000 iii. Creditors 82,600 iv. Cash 38,000 v. Short-term Investments 2,00,000 vi. Short-term Loan 1,42,000 vii. Long-term Investments 3,00,000 viii. Outstanding expenses 50,000

Question

Accepted Answer

### (a) Meaning of Cash Conversion Cycle (CCC)
The Cash Conversion Cycle refers to the length of time between a firm's purchase of inventory and the receipt of cash from accounts receivable. It represents the period during which cash is tied up in business operations — from the moment cash is spent on raw materials or goods until it is recovered through customer payments.

### (b) Relationship between CCC and Working Capital
The longer the cash conversion cycle, the greater the quantum of working capital required by a business. This is because during the entire CCC period, the business's cash is locked in inventory and receivables and cannot be used for other purposes. A business with a short CCC (like a retail shop) needs less working capital, while a business with a long CCC (like a manufacturing unit) needs more working capital to sustain operations.

### (c) Calculation of Gross Working Capital for Ojas Ltd.
Current Assets:
- Stock = ₹1,00,000
- Debtors = ₹2,50,000
- Cash = ₹38,000
- Short-term Investments = ₹2,00,000

**Gross Working Capital** = Total Current Assets
= 1,00,000 + 2,50,000 + 38,000 + 2,00,000
= **₹5,88,000**

Note: Creditors (₹82,600), Short-term Loan (₹1,42,000), and Outstanding expenses (₹50,000) are current liabilities and are not included in Gross Working Capital. Long-term Investments (₹3,00,000) are non-current assets and are also excluded.