Operating cycle, cash conversion cycle and working capital
Calculate days inventory outstanding, days sales outstanding and days payable outstanding, the operating cycle, the cash conversion cycle and your company's working capital needs.
Cash conversion cycle and working capital
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Operating cycle, cash conversion cycle and working capital: what it is for
Enter your average inventory, receivable and payable days and your monthly cost of sales. The calculator shows the operating cycle, the cash conversion cycle, a chart comparing the periods and how much working capital the company needs to fund operations.
How to use
- Enter the average days.
- Enter the cost of sales.
- See the cycle and the working capital.
When to use it
- Planning the company's cash flow.
- Negotiating terms with suppliers.
- Deciding whether you need a loan.
Frequently asked questions
What is the cash conversion cycle?
It is the time, in days, between paying suppliers and getting paid by customers. Cash conversion cycle = days inventory outstanding + days sales outstanding − days payable outstanding. The longer it is, the more working capital the company needs.
How do I calculate the average days?
Inventory days = average inventory ÷ cost of goods sold × 360. Receivable days = accounts receivable ÷ credit sales × 360. Payable days = accounts payable ÷ credit purchases × 360. If you prefer, enter the days directly.
How can I reduce working capital needs?
Cut idle inventory, shorten the payment terms you give customers (or factor receivables at a low rate) and negotiate longer terms with suppliers.
Is it really free?
Yes, 100% free. No sign-up, no subscription and no usage limits. All Tools123 tools are free and run right in your browser.