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| Cash Conversion Cycle |
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| https://www.dwmbeancounter.com |
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| Input Cells are colored |
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| Enter Period |
365 |
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| Days - 30, 90, 180, or 365 |
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| 30 Days= 12 Periods |
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| 90 Days= 4 Periods |
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| 180 Days= 2 Periods |
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| 365 Days= 1 Period |
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| Financial Information |
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Period 1 |
Period 2 |
Period 3 |
Period 4 |
Period 5 |
Period 6 |
Period 7 |
Period 8 |
Period 9 |
Period 10 |
Period 11 |
Period 12 |
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| Beginning
Inventory |
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90,000 |
120,000 |
100,000 |
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| Ending
Inventory |
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110,000 |
100,000 |
140,000 |
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| Cost of Goods
Sold |
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600,000 |
700,000 |
900,000 |
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| Beginning
Account Receivable |
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85,000 |
75,000 |
125,000 |
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| Ending Account
Receivable |
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75,000 |
115,000 |
95,000 |
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| Net Credit
Sales |
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1,000,000 |
1,200,000 |
1,500,000 |
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| Beginning
Account Payable |
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45,000 |
55,000 |
65,000 |
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| Ending Account
Payable |
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55,000 |
65,000 |
85,000 |
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| Net Credit
Purchases |
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| Cash Convesion Cycle
Calculations |
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Period 1 |
Period 2 |
Period 3 |
Period 4 |
Period 5 |
Period 6 |
Period 7 |
Period 8 |
Period 9 |
Period 10 |
Period 11 |
Period 12 |
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| DIO |
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61 |
57 |
49 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
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| DSO |
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29 |
29 |
27 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
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| DPO-Preferred
Calculation |
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0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
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| DPO-Alternate
Calculation |
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30 |
31 |
30 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
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| Cash
Conversion Cycle (CCC) |
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60 |
55 |
46 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
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| DIO (Days
Inventory Outstanding) is calculated using the formula given below |
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| DIO
= (Average Inventory / Cost of Goods Sold) * No of Days |
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| A lower DIO
suggests that a company is efficiently managing its inventory and converting
it into sales quickly. |
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| DSO (Days
Sales Outstanding) is calculated using
the formula given below |
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| DSO
= (Average Account Receivable / Total Credit Sales) * No of Days |
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| A lower DSO
indicates that the company collects cash from customers more quickly,
improving cash flow. |
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| DPO (Days
Payable Outstanding) is calculated using the formula given below |
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| DPO
= (Average Account Payable /Net Credit Purchases) * No of Days |
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| If
the total Net Credit Purchase Amount is not available, Cost Of Goods
Sold |
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| is
often used as a substitute although Net Credit Purchases is preferred for
accuracy |
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| A higher DPO can be beneficial as it allows
the company to retain cash longer before settling its obligations. |
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| Cash
Conversion Cycle (CCC) is calculated using the formula given below |
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| Cash
Conversion Cycle (CCC) = DIO + DSO -
DPO |
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| A shorter
cash conversion cycle indicates that a company can quickly convert |
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| its
investments back into cash, which is generally seen as a sign of good
financial health and operational efficiency. |
| Conversely,
a longer cash conversion cycle may suggest inefficiencies in inventory
management |
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| or
collections processes, potentially leading to liquidity issues. |
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