What this calculator measures
Measures the time taken to convert inventory investments into cash flows from sales.
Common use cases
Use this model when the inputs describe the same decision, period and customer or product scope.
- Combine inventory, receivable, and payable days into a cash-cycle estimate.
- Use the result with the recorded inputs: Days inventory outstanding, Days sales outstanding, Days payable outstanding.
- Compare multiple scenarios before making a finance decision.
Formula
Cash conversion cycle = DIO + DSO − DPO
The cycle estimates days cash is tied up in operations.
Worked example
DIO (30) + DSO (40) - DPO (25) equals a 45-day cash conversion cycle.
How to interpret the result
Shorter cycles improve cash flow and reduce working capital needs.
Assumptions and limitations
- Averages for inventory, receivables, and payables are representative.