Cash Conversion Cycle

Cash Conversion Cycle Indicates the time taken by the company to convert the inventory into Liquid Cash in hand Formula Cash Conversion Cycle = Days Inventory Outstanding + Days Receivable Outstanding – Days Payable Outstanding Example Company ABC has the Days...

Payable Days or Days Payable Outstanding

DPO indicates how many days the company takes to pay the money back to its supplier. In other words, it measures the average time cycle for payments to suppliers/creditors in days. Formula Days Payable Outstanding = ( Average Payable / Cost of Goods Sold ) * 365...

Account Receivable Days or Days Sales Outstanding (DSO)

Account Receivable days indicate how many days it takes to collect the money from customers. Formula Days Sales Outstanding = 365 / Account Receivable turnover ratio Example If the Account Receivable Turnover ratio is 10, then the account receivable days is 36.5 days....

Account Receivable Turnover or Debtor’s Ratio

Account Receivable Turnover indicates how many times the company is able to collect the money from its customer in the given year. Formula Debtor’s Ratio = Revenue / Average Recievablr               Example Company ABC makes Total sales of Rs 100 Cr and the...

Inventory Days or Days Inventory Outstanding

Inventory turnover ratio indicates how many days the company takes to convert the inventory into Sales Formula              Inventory days = 365 / Inventory Turnover Example The ITR (Inventory turnover ratio) of the company ABC is 8.2. Then the Inventory days is 44.5...

Inventory turnover ratio

The inventory turnover ratio indicates how many times the inventory is converted into sales in one year. Formula                  Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory     Example Company ABC has an average inventory of Rs 100 Cr and Sales...