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Working Capital Cycle


The Working Capital Cycle displays how efficient the business is in dealing with its cash inflows and outflows.

It considers, on average, how long customers take to pay their invoices, how long the company takes to pay its own bills as well as how long stock remains unsold (if applicable).

Generally, a low (or even negative) number of working capital days is optimal.

A high number of working capital cycle days may indicate that the company is (or soon will be) suffering from cash flow problems.


Basis of Calculations:

Working Capital Days = Debtor Days + Stock Days – Creditor Days


Debtor Days = [ Trade Debtors (at month-end) / Sales Income (last 12 months) ] x 365

Stock Days = [ Stock Held (at month-end) / Cost of Sales (last 12 months) ] x 365

Creditor Days = [ Trade Creditors (at month-end) / Cost of Sales (last 12 months) ] x 365


The Xero accounts that contribute to the following variables in the Working Capital Cycle calculation can be added and removed in settings:

  • Trade Debtors
  • Stock Held
  • Trade Creditors

The accounts that are created in the default chart of accounts in Xero are added automatically.