Should I use closing balances or averages?

Averages of the opening and closing balance give a smoother read across a period. Closing balances are fine for a quick snapshot. Be consistent so the ratios stay comparable.

Why is DSO based on revenue but DPO and DIO on cost of goods sold?

Receivables arise from sales, so DSO is measured against revenue. Payables and inventory sit at cost, so DPO and DIO are measured against cost of goods sold.

Is a negative cash conversion cycle good?

Often yes. It means suppliers and customers effectively fund your operations: you collect cash before paying it out. Many subscription and retail businesses run this way.

What period length should I use?

Use the number of days in the period your revenue and cost of goods sold cover. A full year is 365 days; a quarter is about 90.

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Working capital & cash conversion cycle calculator

Turn receivables, payables, inventory, revenue, and cost of goods sold into DSO, DPO, DIO, the cash conversion cycle, and net working capital. Enter five balances and read the result.

Your figures

Accounts receivable

The balance owed to you by customers.

Accounts payable

The balance you owe suppliers.

Inventory

The value of stock on hand.

Revenue

Sales for the period below.

Cost of goods sold

Direct cost of what you sold in the period.

Period length (days)

Days in the period. Use 365 for a full year.

Your working-capital cycle

Cash conversion cycle48.7 daysDSO plus DIO minus DPO gives the cash conversion cycle.

Net working capital120,000

DSO (days sales outstanding)36.5 days

DIO (days inventory outstanding)48.7 days

DPO (days payables outstanding)36.5 days

How it works

What the cash conversion cycle tells you

The cash conversion cycle measures how many days cash is tied up between paying for inventory and collecting from customers. A shorter cycle frees up cash. It is built from three ratios.

DSO, DPO, and DIO

DSO is how long customers take to pay, DPO is how long you take to pay suppliers, and DIO is how long inventory sits before it sells. Each is a balance divided by revenue or cost of goods sold, scaled to the period.

The cycle: DSO + DIO - DPO

Add the days cash is tied up in receivables and inventory, then subtract the days your suppliers finance for you. The lower the number, the faster cash comes back to the business.

Net working capital

Receivables plus inventory minus payables is the short-term capital the business funds day to day. Track it alongside the cycle to see the cash story from both angles.

Sources

These are standard financial-ratio definitions. The references below describe the cash conversion cycle and its components.

This is an example based on the figures you entered and standard ratio definitions. It is not accounting or financial advice. Use consistent period balances, or period averages, for a reliable read.

See working capital move in real time

Rivane keeps receivables, payables, and inventory in one ledger, so the cash conversion cycle is a live figure, not a month-end spreadsheet.

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