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How receivables turnover works

Receivables turnover is 365 divided by days sales outstanding. A DSO of 45 days is 8.11 turns a year on a 365 day year. That 45 also sits in the operating cycle: 45 of receivables plus 60 of stock is 105 days.

Cash conversion cycle

75 days

Inventory and receivables hold cash for 105 days. Payables give 30 days of that back.

Operating cycle (DSO + DIO)
105 days
Days payable outstanding
30 days
Cash conversion cycle
75 days

How long customers take to pay. Receivables over daily sales.

How long stock sits. Inventory over daily cost of goods.

How long the firm takes to pay suppliers. A larger figure shortens the cycle.

On this page

Next on Models and deals

Payables turnover

In short

  • Turnover is 365/DSO365 / DSO. DSO 45 is 8.11 turns. DSO is the input on this calculator; the 365 is the year convention.
  • That 45 plus DIO of 60 is a 105 day operating cycle. CCC is 75 days after DPO of 30.
  • DSO 30 is 12.17 turns. The operating cycle is then 50 days with DIO 20, and CCC is minus 50 after DPO 100.
  • DSO 40 is 9.125 turns. Equal clocks of 40 print an 80 day operating cycle and a 40 day CCC.
  • Some sheets use 360. 360/45=8360 / 45 = 8 exactly. Say which year you used. How days sales outstanding works owns the days. This page owns the turns.

Turns are days written the other way up

Receivables turnover asks how many times a year the receivable account turns over:

Receivables turnover=365DSO\text{Receivables turnover} = \frac{365}{DSO}

DSO of 45 days is 365/45=8.111365 / 45 = 8.111, which prints as 8.11 turns. The cash conversion cycle calculator on this page takes DSO as an input. It does not compute DSO from receivables and sales. Type the days, then invert.

That 45 plus DIO of 60 is a 105 day operating cycle. Minus DPO of 30 is a 75 day cash conversion cycle. How days sales outstanding works owns those days. This page owns 365 over DSO.

DSO against receivables turnover is the same clock as a wait and as a turns figure.

A faster turn is a shorter wait

DSO 30 is 365/30=12.167365 / 30 = 12.167, which prints as 12.17 turns. Customers pay in two thirds the time, so the account turns about one and a half times as often as 8.11. With DIO 20 the operating cycle is 50 days. DPO 100 then makes CCC minus 50 days.

A retailer collecting in 30 days is not a capital-goods firm collecting in 45. Compare turns inside a sector, or the comparison is the business model.

Equal clocks, 9.125 turns

DSO 40 is 365/40=9.125365 / 40 = 9.125 turns. DIO 40, DPO 40. Operating cycle 80 days. CCC 40 days. The turns figure became 9.125 because DSO was 40, not because the other clocks matched.

365 or 360, sales in the denominator

Some ledgers use a 360 day year, which makes 360/45=8360 / 45 = 8 exactly. This page uses 365, so 45 days is 8.11, not 8. Mixing 365 on one firm and 360 on the next is a fake ranking. Name the year and keep it.

DSO itself is usually receivables over daily sales. Using cost of goods in that denominator mixes a cost into a sales clock, and the turns will not match the days on this calculator. Inventory turnover is the stock cousin, 365 over DIO, usually against cost of goods.

Turns are not a cash balance

8.11 turns on a growing book still consumes cash, because the same days sit on a larger sales number. Cutting DSO by refusing customers can cost more than the cash it frees. The working capital dollar figure is the receivable identity. This is the days identity inverted.

What this page is not doing

It is not a sales engine, not a 360 day table, and not a target of 8.11 turns. The three sheets are DSO 45 (8.11 turns, operating cycle 105, CCC 75), DSO 30 (12.17 turns, operating cycle 50, CCC minus 50), and DSO 40 (9.125 turns, operating cycle 80, CCC 40). This is educational material, not financial advice.

Worked examples

DSO 45, 8.11 turns

DSO 45, DIO 60, DPO 30. What is receivables turnover on a 365 day year, and what is the operating cycle?

  1. Turnover: 365/45=8.111365 / 45 = 8.111, which prints as 8.11 turns.
  2. Operating cycle: 45+60=10545 + 60 = 105 days.
  3. CCC: 105−30=75105 - 30 = 75 days.

Receivables turnover is 8.11 times a year. The operating cycle is 105 days. CCC is 75 days.

DSO 30, 12.17 turns

DSO 30, DIO 20, DPO 100. Turnover on a 365 day year?

  1. Turnover: 365/30=12.167365 / 30 = 12.167, which prints as 12.17 turns.
  2. Operating cycle: 30+20=5030 + 20 = 50 days.
  3. CCC: 50−100=−5050 - 100 = -50 days.

Receivables turnover is 12.17 times a year. The operating cycle is 50 days. CCC is minus 50 days.

DSO 40, 9.125 turns

DSO 40, DIO 40, DPO 40. Turnover?

  1. Turnover: 365/40=9.125365 / 40 = 9.125 turns.
  2. Operating cycle: 40+40=8040 + 40 = 80 days.
  3. CCC: 80−40=4080 - 40 = 40 days.

Receivables turnover is 9.125 times a year. The operating cycle is 80 days. CCC is 40 days.

Common questions

Why 365 and not 360?

This page uses 365 so a 45 day DSO is 8.11 turns, not 8. A 360 day year is a different convention. Name which one you used.

Is a higher turnover always better?

It is a shorter wait. It can also be tighter terms that shrink the book. Compare inside a sector.

Does this calculator compute DSO from receivables?

No. DSO is an input. Invert it after you have the days. This is educational material, not financial advice.

Keep reading

This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.