⚙️ Efficiency Ratios Calculator
Enter working-capital figures to get inventory turnover, DSO, DPO, asset turnover and the cash conversion cycle — each explained in business terms.
Inventory is sold and replaced 6 times a year, roughly every 61 days (days inventory outstanding). Faster turnover ties up less cash in stock, but "right" depends on the industry — perishables turn fast, heavy equipment slow.
Customers take about 44 days to pay on average (days sales outstanding). Compare to your payment terms — well above them signals slow collection and cash tied up in receivables.
The company takes about 49 days to pay its suppliers (days payable outstanding). Longer holds onto cash longer, but stretching too far can strain supplier relationships.
Each $1 of assets generates $0.5 of revenue — how efficiently the asset base produces sales. Retailers run high, capital-intensive firms low; compare within the industry.
It takes about 56 days to convert investments in inventory and receivables back into cash (inventory days + collection days − payment days). Shorter frees up working capital.
Efficiency (activity) ratios show how well a company turns its assets and working capital into sales and cash. “Fast” is relative — grocers turn inventory many times a year, heavy-equipment makers slowly — so benchmark against the industry and your own payment terms. A shorter (or negative) cash conversion cycle frees up working capital. Educational information, not financial advice. 🔒 In your browser.
How the efficiency ratios calculator works
Efficiency (activity) ratios show how well a company turns its assets and working capital into sales and cash. The tool computes inventory turnover (and days inventory outstanding), receivables turnover (and DSO — days to collect), payables turnover (and DPO — days to pay), asset turnover (revenue ÷ assets) and the cash conversion cycle (DIO + DSO − DPO) — interpreting each.
Like profitability, these are industry-relative — grocers turn inventory many times a year while heavy-equipment makers turn it slowly — so compare to peers and to your own payment terms rather than an absolute target. A shorter, or even negative, cash conversion cycle is generally better because it frees up working capital. Educational information, not financial advice.
Frequently asked questions
What is inventory turnover and what is a good number?
Cost of goods sold ÷ average inventory — how many times a year stock is sold and replaced. "Good" varies hugely by industry (groceries high, machinery low), so compare to peers. Days inventory outstanding = 365 ÷ turnover.
What is DSO (days sales outstanding)?
The average number of days customers take to pay: 365 ÷ receivables turnover. Compare it to your credit terms — a DSO well above them means slow collection and cash tied up in receivables.
What is the cash conversion cycle?
Days inventory outstanding + days sales outstanding − days payable outstanding: the time to convert money spent on inventory back into cash from customers. Shorter is better; a negative cycle means suppliers effectively finance your operations.
Is a negative cash conversion cycle good?
Usually yes — it means you collect from customers before paying suppliers, funding operations with supplier credit. Big retailers like this are famous for it. It reflects strong working-capital management, though it depends on the business model.
What is asset turnover?
Revenue ÷ total assets — how much sales each dollar of assets generates. Asset-light retailers and services run high; capital-intensive manufacturers and utilities run low. It's a peer-comparison metric, which is why the tool flags it as such.
Educational information, not financial advice. These calculators use standard formulas with the figures you enter; results are illustrations, not guarantees. For decisions about your money, consult a qualified, regulated financial professional.