Rytvae Consulting · Think Right · Invest Right
Operating Cycle Calculator
Result
Chart
Show formula & working
Days = Balance ÷ Annual figure × 365 (raw material ÷ consumption, WIP ÷ cost of production, finished goods ÷ cost of sales, receivables ÷ credit sales, payables ÷ credit purchases)
Operating cycle = RM days + WIP days + FG days + Receivable days
Cash conversion cycle = Operating cycle − Payable days
Details
How this works
The operating cycle is the time from buying raw material to collecting cash from customers. Supplier credit shortens the part the business has to fund itself — that net figure is the cash conversion cycle.
A shorter cycle frees cash: faster collection, leaner stock or longer supplier credit all reduce the working capital the business needs to borrow.
Frequently asked questions
Which balances should I use — year-end or average?
Average balances give a truer picture if the year-end is unusual. Use the same basis for every line.
How do lenders use this?
In the operating-cycle method of assessing working capital, the holding periods drive the projected current assets and so the limit.
Working capital limits up for renewal?
Assessment method, drawing power and the right mix of CC, OD and bills change what you can draw. Talk to Rytvae.