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Inventory, Receivables & Payables Cash Cycle

Calculate the cash conversion cycle from average balances and period revenue or cost of goods sold.

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Calculator inputs

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How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Where results are editable, change one to solve backwards. Lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

Over 365 days, revenue of 365,000 and receivables of 30,000 give 30 collection days. Cost of goods sold of 182,500, inventory of 20,000 and payables of 15,000 give 40 inventory days and 30 payable days, for a 40-day cash cycle.

Cash cycle = inventory days + receivable days − payable days; days = average balance ÷ matching period flow × period days

Worked example

Enter these known values and leave the other values blank.

Period of analysis
365 days
Total revenues
365000 USD
Cost of goods sold
182500 USD
Average inventory
20000 USD
Average accounts receivables
30000 USD
Average accounts payable
15000 USD
Accounts receivables days
30 days
Inventory days
40 days
Accounts payable days
30 days
Cash conversion cycle
40 days

Assumptions and limitations

  • Revenue, cost of goods sold and average balance measurements must refer to the same reporting period and business scope. Revenue, cost of goods sold and the period length must be positive.
  • The captured model uses total revenue as the receivables denominator and cost of goods sold for payables and inventory. Credit-sales or credit-purchases methods can give different results.
  • Beginning and ending balances form a simple two-point average. A seasonal business may need a more representative average balance supplied directly.
  • A negative cash cycle is possible when the payable period exceeds the inventory and receivable periods combined. It does not by itself establish profitability or available cash.
  • Use a consistent currency when comparing amounts. Optional currency conversions use captured reference factors, not live exchange rates, bank quotes or fees.

Common questions

Can the cash cycle be negative?

Yes. If customers pay before the modeled supplier-payment period ends, payable days can exceed the other two periods combined. The arithmetic then returns a negative cycle.

How do I use opening and closing balances?

Enter both balances for inventory, receivables or payables. The tool uses their arithmetic mean as the corresponding average balance.

References

The calculation equations, inverse formulas, units, and input rules were imported from this source. Bookify provides the interface and equation solver.

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