Methodology: Cash Conversion Cycle Calculator

1. Scope

Computes the cash conversion cycle from days inventory outstanding (DIO), days sales outstanding (DSO), and days payable outstanding (DPO), and estimates working-capital lockup. It assumes steady-state operations.

2. Inputs and outputs

Inputs

dio number (days)

Average days inventory is held.
dso number (days)

Average days to collect from customers.
dpo number (days)

Average days you take to pay suppliers.
dailyRevenue number (currency/day) default: 0

For working-capital estimate.

Outputs

ccc

DIO + DSO − DPO, in days.
workingCapitalLocked

ccc × dailyRevenue (estimate).

Engine source: src/lib/cash-conversion-cycle-calculator/engine.ts

3. Formula / scoring logic

ccc = dio + dso - dpo
wc_locked = ccc * daily_revenue

4. Assumptions

DIO, DSO, DPO are trailing averages, not spot values.
Daily revenue is constant; seasonal businesses will over- or under-estimate working capital.
No credit insurance or factoring is netted out.

5. Data sources

CFA Institute — CFA Program curriculum, Financial Statement Analysis as of 2024

6. Known limitations

Services businesses with no inventory have DIO = 0 by definition. The ratio-based CCC is most meaningful for goods businesses.
Negative CCC (typical for marketplaces that collect before paying suppliers) indicates customers finance your operations — valuable but not a risk-free signal.

7. Reproducibility

Input
dio = 40, dso = 30, dpo = 25, dailyRevenue = $5,000.

Expected output
ccc = 45 days, wc_locked ≈ $225,000.

8. Change log

2026-04-24 methodology page first published.