Working Capital Calculator
Working capital, the working capital ratio, and the cash conversion cycle underneath it: how many days your money is tied up between paying for something and being paid for it.
Work it out
Opens on a worked example. Change any line and every figure follows. Cost of goods sold and operating expenses go in before depreciation and amortisation.
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Working capital
8,200,000.00
- Days sales outstanding
- 54 days
- Days inventory outstanding
- 60 days
- Days payables outstanding
- 20 days
- Cash conversion cycle
- 94 days
What collecting faster is worth
releases 1,000,000.00 of cash at this revenue
How it is worked out
| Ratio | Formula |
|---|---|
| Working capital | Current assets - Current liabilities |
| Days sales outstanding | Receivables / Revenue x Days in period |
| Days inventory outstanding | Inventory / COGS x Days in period |
| Days payables outstanding | Payables / COGS x Days in period |
| Cash conversion cycle | DSO + DIO - DPO |
Cost of goods sold and operating expenses are entered before depreciation and amortisation, which are their own lines.
Related reading
Where the figures behind a ratio come from, and what it takes to trust them.
- Glossary
General Ledger
The general ledger is the master record of an entity's accounts, holding every posted debit and credit by account and period. Subledgers feed it, the chart of accounts defines its structure, and the trial balance is its summary.
- Glossary
Balance Sheet Reconciliation
Balance sheet reconciliation is the practice of reconciling every balance sheet account, not just cash, on a documented schedule with a named owner and risk tier per account. It is the close deliverable auditors test first, and account reconciliation is the technique it applies, account by account.
- Glossary
Variance Analysis
Variance analysis compares an actual result against a benchmark, usually budget, forecast, or prior period, and explains the difference with specific, evidenced causes. It is distinct from flux analysis, which reviews period-over-period fluctuations during the close.
- Free tool
Financial Ratio Calculators
Every ratio from one set of statements.
- Free tool
13-Week Cash Flow Forecast
What a ratio is a snapshot of, week by week.
The formula
Working capital = Current assets - Current liabilities
DSO = Receivables / Revenue x 365
DIO = Inventory / COGS x 365
DPO = Payables / COGS x 365
Cash conversion cycle = DSO + DIO - DPO
What the number means
Working capital as a dollar figure says whether there is a cushion. The cash conversion cycle says how the business actually consumes cash, and it is the more useful of the two by a wide margin.
A cycle of 70 days means every dollar of growth needs 70 days of funding before it comes back. That is why a profitable, growing company runs out of cash: growth consumes working capital, and the faster it grows the more it consumes. This is the single most common way a business with a full order book fails, and the cycle is where you see it coming.
A negative cycle is a financing advantage. Companies that collect before they pay, which includes most subscription businesses and some retail, are funded by their own operations and can grow without external capital. The number being negative is not an error.
Each of the three components is a lever owned by a different part of the company, which is why this is a management number rather than a reporting one: DSO belongs to collections, DIO to operations, DPO to procurement.
A worked example
A manufacturer on $36.5 million of revenue with DSO of 54 days, DIO of 60 and DPO of 20: a 94-day cycle, growing 40% a year, showing the cash the growth consumes. Ten days off DSO is worth $1,000,000 of cash at this revenue.
Ratios are downstream
of the close.
Connected accounts, reconciled at zero tolerance, with statements for any period and any entity. Your team approves what the agents propose, and the numbers the ratios come from are ones you can sign.