Working capital management is critical for financial modeling, cash flow forecasting, and business decision-making. This guide provides a complete cheat sheet for key metrics like Accounts Receivable (AR), Accounts Payable (AP), and Inventory — including formulas, explanations, and links to detailed 3-statement forecast examples.
1. Accounts Receivable Turnover
What it measures: Efficiency of collecting receivables.
Formula: Net Credit Sales / Average Accounts Receivable
Learn more / Practice:
📄 Accounts Receivable Turnover Formula & 3-Statement Forecast
🔍 Accounts Receivable Turnover Concept & Practices
2. Accounts Receivable Days
What it measures: Average days to collect receivables.
Formula: (Accounts Receivable / Net Credit Sales) * 365
Learn more / Practice:
📄 Accounts Receivable Days Formula & 3-Statement Forecast
🔍 Accounts-Receivable Days Concept & Practices
3. Accounts Payable Turnover
What it measures: How quickly a company pays suppliers.
Formula: Cost of Goods Sold / Average Accounts Payable
Concept Page:
🔍 Accounts Payable Turnover
4. Accounts Payable Days
What it measures: Average days to pay suppliers.
Formula: (Accounts Payable / Total Cost of Goods Sold) * 365
Learn more / Practice:
📄 Accounts Payable Days Formula & How to Use It in a 3-Statement Forecast
🔍 Accounts Payable Days Concept & Practices
5. Inventory Turnover
What it measures: Efficiency of inventory management.
Formula: Cost of Goods Sold / Average Inventory
Concept Page:
🔍 Inventory Turnover
6. Inventory Days
What it measures: Average days inventory is held.
Formula: (Inventory / Total Cost of Goods Sold) * 365
Concept Page:
🔍 Inventory Days
Conclusion
These six metrics form the foundation of working capital management and are essential for effective financial modeling. For a deeper understanding and hands-on practice, explore the interactive 3-statement forecast examples linked above, as well as our Balance Sheet Forecast Practice.