Metric Explainer: Working Capital Days
Working capital days measure how long a company's cash is tied up in daily operations — in inventory waiting to be sold, in receivables waiting to be collect...
Simple definition
Working capital days measure how long a company's cash is tied up in daily operations — in inventory waiting to be sold, in receivables waiting to be collected, minus payables the company hasn't yet paid.
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"Working capital days = kitne din ka paisa operations mein atka rehta hai."
Formulas
Inventory Days = Inventory / COGS × 365
Receivable Days (DSO) = (Trade Receivables) / Revenue × 365
Payable Days (DPO) = (Trade Payables) / COGS × 365
Cash Conversion Cycle = Inventory Days + Receivable Days - Payable Days
Good range — by sector
| Sector | Typical CCC | Why |
|---|---|---|
| IT Services | Negative to 30 days | No inventory, clients pay within 60 days |
| FMCG | 0 to 30 days | Fast-moving goods, strong payable terms |
| Manufacturing | 60 to 120 days | Raw material + WIP + finished goods |
| Pharma | 90 to 150 days | R&D inventory, long production cycles |
| Construction | 150 to 300 days | Long project timelines, retention money |
Negative working capital — the best businesses
Some companies have negative working capital — meaning they collect cash before they pay suppliers. This is a sign of business power.
| Company | Why negative WC |
|---|---|
| HUL | Strong brand → sells fast, delays supplier payment |
| Asian Paints | Dealers pay upfront, paint raw materials on credit |
| Titan (Tanishq) | Customer advances for jewellery orders |
The power of negative WC
A company with negative working capital is effectively funded by its suppliers and customers. It doesn't need to lock up its own capital in operations — it can deploy that capital elsewhere.
Red flags
| Signal | What it means |
|---|---|
| Inventory days rising 20%+ YoY | Goods not selling, potential write-down risk |
| Receivable days rising 30%+ YoY | Customers not paying, possible channel stuffing |
| Payable days falling | Company losing bargaining power with suppliers |
| CCC increasing for 3+ years | Cash getting stuck — investigate why |
Real example
| Metric | Company X (FY22) | Company X (FY24) |
|---|---|---|
| Inventory Days | 45 | 70 |
| Receivable Days | 30 | 55 |
| Payable Days | 40 | 35 |
| CCC | 35 days | 90 days |
CCC jumped from 35 to 90 days in 2 years. Inventory piling up, customers paying slower, suppliers demanding faster payment. This is a working capital crisis in the making.
Related metrics
- CFO Conversion — Working capital changes drive the gap between profit and cash
- Free Cash Flow — WC drag reduces FCF