AR Days, Inventory Days & AP Days
AR: (AR / Revenue) × 365 · Inv: (Inv / COGS) × 365 · AP: (AP / COGS) × 365These working capital cycle metrics measure how quickly the business collects receivables, turns inventory, and pays suppliers.
How it's used in a deal
AR Days >60 may indicate collection issues. Inventory Days >90 may indicate obsolescence risk. AP Days indicate payment terms with suppliers.
Worked example
Fictional Precision Auto Service, FY 2024. Missing inputs remain unavailable.
Year-end balance ratios only; no seasonal pattern or working-capital requirement is verified.
Inputs and supported results from our fictional sample deal report — Fictional, incomplete example. No real customer documents, verified source support or independent accountant review are supplied.
Important caveat
These metrics are calculated from year-end balances, which may not represent typical operating levels for seasonal businesses.
Frequently asked questions
Why do cash cycle days matter to a buyer?
They determine how much working capital you must fund from day one. A business that collects in 30 days but pays suppliers in 27 needs its receivables and inventory financed — that's real money on top of the purchase price if the working capital peg doesn't cover it.
What does rising AR days between years mean?
Customers are paying slower — or a big customer is in trouble, or revenue was pulled forward at year-end. Ask for an AR aging by customer; it's one of the highest-signal documents in small business diligence.
Review Cash Cycle Days for your acquisition
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Related metrics
Educational content from a decision-support tool — not a CPA audit, review, or assurance engagement, and not tax, legal, or investment advice.