The Complete Guide to Working Capital Management

Learn how to calculate days sales in inventory (DSI) as 365 divided by inventory turnover, using average inventory (beginning plus ending divided by two), and why ending inventory can mislead.

Reduce days sales in inventory to shorten the cash conversion cycle and lower inventory holding costs, cutting financing needs and improving profitability through faster inventory turnover.

Analyze a company's days sales in inventory (DSI) by comparing industry benchmarks, tracking time trends, and considering caveats that can mislead, such as differing business models and seasonal effects.

Reduce days in inventory by marketing, procurement, and inventory management to hold the right inventory at the right place and time with accurate information.

Compute days sales outstanding and receivables turnover from average net accounts receivable and total credit sales, and illustrate how days sales outstanding reflects how quickly a company collects credit sales.

Reduce days sales outstanding to free up cash, shorten the cash conversion cycle, and improve the collection rate.

Explore factors shaping day sales outstanding, including industry norms, credit terms, and receivables management, and learn to analyze long-term trends and key caveats for informed working capital decisions.

Days payable outstanding shows how long a company takes to pay suppliers. Compute it via 365 divided by payables turnover, or via average accounts payable over cost of goods sold.

discover how to optimize days payable outstanding to shorten the cash conversion cycle, weighing early payment discounts against delaying payments, while maintaining supplier relationships.

Analyze days payable outstanding across industries and time to assess supplier terms, cash flow, and the tradeoffs of delaying payments, including early payment discounts and supplier relationships.

Optimize days payable outstanding by streamlining accounts payable, standardizing payment terms, and judiciously using early payment discounts, comparing APR and EIR to balance cash flow and supplier relations.

Learn why firms hold cash despite low returns, covering the cash conversion cycle, precautionary balances, bank requirements, and centralized cash management with prudent investments.