Working Capital & Cash Conversion Cycle Calculator
Computes Net Working Capital, Current and Quick liquidity ratios, Days Inventory Outstanding (DIO), Days Sales Outstanding (DSO), Days Payables Outstanding (DPO), and Cash Conversion Cycle (CCC).
Computational Framework & Statutory Formulas
Net Working Capital = Current Assets - Current Liabilities
Current = Current Assets / Current Liabilities | Quick = (Current Assets - Inventory) / Current Liabilities
CCC (Days) = Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) - Days Payables Outstanding (DPO)
Nigerian Economic & Statutory Context
Nigerian SMEs frequently experience liquidity strain due to delayed payment terms from large corporate clients and government agencies (DSO exceeding 90 to 120 days). Managing the Cash Conversion Cycle ensures cash is not trapped in slow inventory or receivables.
Frequently Asked Questions (FAQ)
What does a negative Cash Conversion Cycle mean?
A negative Cash Conversion Cycle means a business receives customer payments before it has to pay its suppliers for inventory (such as high-volume retail supermarkets and advance-fee subscription businesses). It allows the business to fund its working capital using supplier credit.
Why is the Quick Ratio more critical than the Current Ratio during Nigerian liquidity audits?
The Quick Ratio excludes inventory because stock may not be easily or immediately liquidated in a downturn without steep discounts. It provides a more conservative measure of whether the firm can satisfy its immediate obligations.