Can the cycle be negative?

Yes, and it is excellent. It means you collect from customers before paying suppliers, so growth generates cash instead of consuming it.

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Cash Conversion Cycle Calculator

The cash conversion cycle and the working capital it demands. A negative cycle means customers pay before suppliers do, which funds growth for free and is why retail and subscription businesses scale without capital.

Also called: working capital cycle, ccc calculator.

Cash conversion cycle

70 days between paying suppliers and collecting from customers, which ties up ₹1,19,00,000. Cash is committed for the length of the cycle, which growth makes larger.

Working capital tied up

₹1,19,00,000

Operating cycle

105

Cash released per day cut

₹1,70,000

On the sign

Cash is committed for the length of the cycle, which growth makes larger.

How this is calculated

Method and background

How this is calculated

The cycle adds the days stock sits and the days customers take to pay, then subtracts the days you take to pay suppliers. The result is how long your own cash is committed. Multiplying by daily revenue converts it to the amount of working capital the business requires. A negative cycle is the prize: it means suppliers finance the business, which is how large grocers and subscription companies grow without raising money.

how long cash is out of the business: stock held plus collection time, less the credit you take

DIO, DSO, DPO: Inventory, receivable and payable days

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a typical manufacturer

Days inventory outstanding: 60
Days sales outstanding: 45
Days payable outstanding: 35
Daily revenue: ₹1,70,000

Cash conversion cycle70

60 + 45 - 35, times daily revenue

Open this example

a negative cycle needs no working capital

Days inventory outstanding: 10
Days sales outstanding: 5
Days payable outstanding: 45
Daily revenue: ₹1,70,000

Cash conversion cycle-30

boundary: the retail and subscription case

Open this example

all zeros is a zero cycle

Days inventory outstanding: 0
Days sales outstanding: 0
Days payable outstanding: 0
Daily revenue: ₹1,70,000

Cash conversion cycle0

degenerate case

Open this example

Method and limits

What it assumes

Steady-state operations across the year.

What it deliberately does not model

Stretching payables is the easiest way to improve this and the fastest way to lose supplier goodwill.
Seasonal businesses see the figure move sharply through the year.

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Frequently asked questions

Can the cycle be negative?: Yes, and it is excellent. It means you collect from customers before paying suppliers, so growth generates cash instead of consuming it.