# Working Capital Cash Conversion Cycle Calculator

> Source: https://netray.co/tools/working-capital-cash-conversion-cycle-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Compute DIO, DSO, DPO and the cash conversion cycle from balance sheet and P&L figures, plus cash released by a day of improvement.

## Category

cost-finance

## Audience

- Controller
- CFO
- Operations manager

## Tool

**Kind:** calculator

**Currency:** $

**Inputs:**

#### Annual revenue

**Key:** revenue

**Type:** number

**Default:** 48000000

**Min:** 0

**Step:** 100000

**Unit:** $

#### Annual cost of goods sold

**Key:** cogs

**Type:** number

**Default:** 33000000

**Min:** 0

**Step:** 100000

**Unit:** $

#### Average inventory

**Key:** inventory

**Type:** number

**Default:** 8200000

**Min:** 0

**Step:** 50000

**Unit:** $

#### Average accounts receivable

**Key:** receivables

**Type:** number

**Default:** 6400000

**Min:** 0

**Step:** 50000

**Unit:** $

#### Average accounts payable

**Key:** payables

**Type:** number

**Default:** 4100000

**Min:** 0

**Step:** 50000

**Unit:** $

#### Days in period

**Key:** days

**Type:** select

**Default:** 365

**Options:**

##### 365 days

**Value:** 365

##### 360 days

**Value:** 360

#### Days of improvement to test

**Key:** improve

**Type:** slider

**Default:** 5

**Min:** 0

**Max:** 30

**Step:** 1

**Unit:** days

**Outputs:**

#### Days inventory outstanding

**Key:** dio

**Expr:** if(eq(cogs,0),0,inventory/cogs*days)

**Format:** days

#### Days sales outstanding

**Key:** dso

**Expr:** if(eq(revenue,0),0,receivables/revenue*days)

**Format:** days

#### Days payable outstanding

**Key:** dpo

**Expr:** if(eq(cogs,0),0,payables/cogs*days)

**Format:** days

#### Cash conversion cycle

**Key:** ccc

**Expr:** dio + dso - dpo

**Format:** days

**Primary:** true

**Description:** Days between paying suppliers and collecting from customers.

#### Cash tied up per day of cycle

**Key:** per_day

**Expr:** if(eq(days,0),0,cogs/days)

**Format:** currency

#### Cash released by the improvement tested

**Key:** released

**Expr:** improve * cogs / days

**Format:** currency

**Primary:** true

**Description:** Approximate, valued at cost of goods sold per day.

**Chart:**

#### Cash released vs days improved

**Type:** line

**X:** improve

**From:** 0

**To:** 30

**Steps:** 15

**Series:**

- released

**Disclaimer:** Uses averages and simple ratios. Valuing receivable days at revenue rather than cost would give a larger figure; this tool uses cost per day for a conservative estimate.

## Content

**Intro:** The cash conversion cycle shows how many days cash is tied up between paying for materials and collecting from customers. This calculator derives it from five figures you can read straight from your ERP and shows what a few days of improvement is worth.

**Sections:**

#### How to use it

**Body:** Enter annual revenue and cost of goods sold from the P&L, and average inventory, receivables and payables from the balance sheet. Averaging opening and closing balances, or twelve month-end balances, gives a steadier result than a single date. Read the three days measures and the total cycle, then move the improvement slider to see the cash a few days would release.

#### The formulas

**Body:** Days inventory outstanding is inventory divided by cost of goods sold times days in the period. Days sales outstanding is receivables divided by revenue times days. Days payable outstanding is payables divided by cost of goods sold times days. The cash conversion cycle is DIO plus DSO minus DPO. A lower or negative cycle means the business is funded more by suppliers and less by its own cash.

**Bullets:**

- DIO = inventory / COGS x days
- DSO = receivables / revenue x days
- DPO = payables / COGS x days
- CCC = DIO + DSO - DPO

#### Reading results and common mistakes

**Body:** Compare against your own history and similar manufacturers, not a single universal figure. Do not stretch DPO until suppliers raise prices or stop shipping, and do not cut DIO by starving production of material. Use average balances, and make sure inventory includes the same scope as COGS. In an ERP, the numbers come from the inventory valuation report, AR and AP aging, and the income statement.

**Cta:** If gathering these balances means three exports and a spreadsheet each month, Netray can help automate the calculation from your ERP, read-only and on your own systems.

**Faq:**

#### What is a good cash conversion cycle?

**Answer:** It varies widely by sector. Make-to-stock distributors and long-lead aerospace manufacturers differ greatly. Track your own trend and compare with similar companies using the same formulas.

#### Why use COGS for DIO and DPO?

**Answer:** Inventory and payables are carried at cost, so dividing by cost keeps the ratio consistent. Using revenue would understate the days. DSO uses revenue because receivables are valued at selling price.

#### Which balances should I use?

**Answer:** Average opening and closing balances, or better, the average of twelve month-end balances. A single date can be distorted by seasonality, large shipments or timing of payments.

#### How is cash released estimated?

**Answer:** One day of the cycle is roughly one day of cost of goods sold. Multiply by days improved. It is an estimate and ignores financing costs and one-time effects.

## Search terms

cash conversion cycle calculator, ccc calculator manufacturing, working capital days calculator, dio dso dpo calculator, cash cycle formula, working capital release calculator

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