Cash conversion cycle ESTIMATE
How many days cash sits in receivables and inventory before payables give it back.
Result ESTIMATE
What the three clocks measure
Days sales outstanding is receivables ÷ revenue × days. Days inventory outstanding is inventory ÷ cost of goods sold × days. Days payable outstanding is payables ÷ purchases × days. The cycle adds the first two and subtracts the third. With $10,000 of receivables on $365,000 of revenue, $5,000 of inventory, and $2,000 of payables, each against a $365,000 flow and a 365-day year, the pieces are 10, 5, and 2 days. The cycle is 13 days.
A service firm with no inventory still has a cycle: it is days sales outstanding minus days payable outstanding. Leave inventory and cost of goods sold at zero and the inventory days drop out. This is not the cash runway calculator. Runway asks how long today’s bank balance lasts. This page asks how long a sale ties cash up inside the operating cycle.
Use averages when you have them
A single day-end balance swings with one large invoice. Average of the opening and closing receivable, or a monthly average, is the usual textbook input. The form does not average for you. Build cost of goods sold with the COGS calculator before you trust the inventory days. Sales tax sitting in a liability is not a payable to a vendor; keep it out of the payables box. See sales tax in the books.