Cash Conversion Cycle Calculator
How many days cash is tied up between paying for stock and collecting from customers: days inventory outstanding plus days sales outstanding, less days payables outstanding.
Result
Cash conversion cycle, days: 73 days
From balances on the dates you enter and the period’s flows. No typical cycle is given; it depends on the business.
- Days inventory outstanding
- 67.8
- Days sales outstanding
- 44.3
- Days payables outstanding
- 39.1
https://calcgallery.com/business-investing/cash-conversion-cycle-calculator/
Results are arithmetic estimates based on the assumptions you enter, not accounting, tax, investment or lending advice. Forecasts can be wrong and important decisions should be checked with a qualified adviser. Read the full disclaimer
How to use the Cash Conversion Cycle Calculator
- Choose the period your sales and cost of goods sold cover, and enter both.
- Enter inventory, receivables and payables at the end of the period, and at the start if you have them, under more options.
- Read the cash conversion cycle and the three periods it is built from.
The formulas
days inventory outstanding = average inventory ÷ cost of goods sold × daysdays sales outstanding = average receivables ÷ sales × daysdays payables outstanding = average payables ÷ cost of goods sold × dayscash conversion cycle = inventory days + sales days − payables daysDays is 365 for a year, 365 ÷ 4 for a quarter and 365 ÷ 12 for a month. Averages are of the opening and closing balances when you give both.
Shortening it
The cycle shortens when stock turns over faster, customers pay sooner or suppliers are paid later. Each has a cost: less stock risks running out, tighter credit can lose sales, and paying late can cost discounts or goodwill. The number shows where the days are, not which to cut.
What the diagram shows
The three periods as bars. The first two add to the cycle and the third, the days you take to pay, is subtracted.
With your numbers
- Cycle = 73 + 41.7 − 36.9 = 77.8 days
Quick reference
From balances on the dates you enter and the period’s flows. No typical cycle is given; it depends on the business.
| Example | Cash conversion cycle, days |
|---|---|
| A year, with opening and closing balances | 77.8 |
| A year, closing balances only | 73 |
| A quarter | 19.6 |
| Retailer paid in cash, slow to pay suppliers | -42 |
| A month of a wholesaler | 39 |
| A service business with no stock | 24.3 |
Common questions about the Cash Conversion Cycle Calculator
- What does the cash conversion cycle measure?
- The days between paying for stock and getting cash from customers for it. Stock sits on the shelf for the inventory days, customers take the collection days to pay, and suppliers give you the payment days before you have to pay them. The cycle is the gap the business has to finance itself.
- Why do inventory and payables use cost of goods sold but receivables use sales?
- Each balance is compared with the flow it is measured in. Inventory and payables are at cost, so they are divided by cost of goods sold. Receivables are what customers owe at selling prices, so they are divided by sales. Mixing them would overstate or understate the days by your markup.
- Can the cycle be negative?
- Yes. A business that sells stock quickly for cash and pays suppliers on long terms collects before it pays, so suppliers finance its working capital. The page reports a negative cycle as it is.
- What is a good cash conversion cycle?
- This page does not give one. A supermarket and a machine builder work on very different cycles. Track your own over time: a lengthening cycle means more cash is tied up in running the business.