Working Capital Calculator
Net working capital and the cash conversion cycle.
Enter current assets and liabilities for the working capital position, and add inventory, debtors and creditors for the cash cycle.
The number that explains failures
Profitable businesses fail on cash, not on profit. The cash conversion cycle measures how long money is tied up between paying a supplier and collecting from a customer. A long cycle has to be funded, and funding costs money whether it comes from a bank or from the owner.
Three levers
Hold less stock, collect faster, pay later. Each has a limit — thin stock loses sales, aggressive collection loses customers, and slow payment loses suppliers. The art is knowing which one has slack.
Negative is not always bad
A retailer collecting cash at the till and paying suppliers in sixty days runs a negative cycle, and effectively operates on supplier money. The same figure in a manufacturer would signal something quite different.