Combine inventory, receivable and payable days to find how long cash is tied up in the operating cycle.
Inventory and receivable days consume cash while payable days supply it, so the net figure is how many days of trading you must fund yourself. Multiplying by daily revenue converts the cycle into the actual cash trapped in it. A negative cycle means customers pay before suppliers do, which lets a business grow without external funding — the structural advantage behind many large retailers.
Cash Conversion Cycle
Cash conversion cycle = days inventory + days receivable − days payable
Cash conversion cycle = days inventory + days receivable − days payable Inventory and receivable days consume cash while payable days supply it, so the net figure is how many days of trading you must fund yourself. Multiplying by daily revenue converts the cycle into the actual cash trapped in it.
A negative cycle means customers pay before suppliers do, which lets a business grow without external funding — the structural advantage behind many large retailers.
This calculator takes 4 inputs: Days inventory outstanding, Days sales outstanding, Days payable outstanding, Annual revenue. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.