Working Capital Calculator
The ratios, and how many days your cash is actually tied up.
- Days sales outstanding — how long customers take to pay
- 36.5 days
- Days inventory outstanding — how long stock sits
- 45.6 days
- Days payable outstanding — how long you take to pay
- 36.5 days
- Operating cycle
- 82.1 days
- Quick ratio, excluding inventory
- 1.40
- Cash conversion cycle
- 45.6 days
The cash conversion cycle is how many days your money is tied up between paying suppliers and collecting from customers: receivables days plus inventory days, less payables days. A negative figure is a good thing, not an error — it means your suppliers are financing your working capital, which is the model quick-commerce and subscription businesses run on. Use average balances rather than closing ones wherever a period figure meets a point-in-time one, and note that payables days are more correctly computed on purchases than on cost of goods sold; this uses COGS, which is the common approximation.
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Independent · No commissions · No fund-house data — how the numbers are computed
How it works
Working capital is what funds day-to-day operations: current assets less current liabilities. The ratios say whether you can meet short-term obligations — a current ratio of 1.5 to 2 is generally comfortable, and the quick ratio repeats the test with inventory stripped out, since stock is the hardest current asset to turn into cash quickly.
The more revealing number is the cash conversion cycle: how many days your money is tied up between paying suppliers and collecting from customers. It is receivables days plus inventory days, less payables days.
A negative cycle is a good thing, not an error. It means your suppliers are financing your working capital — you collect before you pay — which is the model quick-commerce, subscription and marketplace businesses run on, and it is why some of them grow without external funding.
DSO = receivables / revenue x 365. DIO = inventory / cost of goods x 365. DPO = payables / cost of goods x 365. Cash conversion cycle = DSO + DIO - DPO.Use average balances rather than closing ones wherever a period figure meets a point-in-time one. Payables days are more correctly computed on purchases than on cost of goods sold; this uses COGS, which is the common approximation.
Frequently asked questions
What is a good cash conversion cycle?
Lower is better, and negative is best. A manufacturer holding stock and selling on credit might run 60 to 120 days; a restaurant, which is paid immediately and pays suppliers later, runs negative. What matters more than the absolute number is the direction: a cycle lengthening while revenue grows means growth is consuming cash faster than it generates it, which is how profitable businesses fail.
Can a profitable business run out of cash?
Routinely, and it is the most common way growing businesses die. Profit is recognised when you invoice; cash arrives when you are paid. If customers take 90 days and suppliers want 30, every new order widens the gap, so the faster you grow the more cash you need. That is precisely what the cash conversion cycle measures and what a profit-and-loss statement will not show you.
How do I shorten the cycle?
Three levers, in rough order of ease. Collect faster: shorter credit terms, deposits up front, chasing overdue invoices systematically, discounts for early payment. Hold less stock: better forecasting, smaller and more frequent orders. Pay slower: negotiate longer terms with suppliers, though not by simply paying late, which costs you relationships and eventually price.
Is a very high current ratio good?
Not necessarily. Above about 3 it often means capital is sitting idle — cash not deployed, stock not moving, receivables not collected. The ratio measures the ability to meet obligations, not the efficiency of the assets doing it, so read it alongside the cash conversion cycle rather than on its own.