AccountingToolsCPECoursesCPECoursesCPELogInHowtoTakeaCourseGroupDiscountsStateCPERequirementsBooksBooksListedbyTitleArticlesArticlesTopicsIndexSiteArchivePodcastAccountingBestPracticesPodcastIndexPodcastSummaryDictionaryFAQsAboutAboutContactEnvironmentalCommitmentHomeAccountingToolsCPECourses/CPECoursesCPELogInHowtoTakeaCourseGroupDiscountsStateCPERequirementsBooks/BooksListedbyTitleArticles/ArticlesTopicsIndexSiteArchivePodcast/AccountingBestPracticesPodcastIndexPodcastSummaryDictionary/FAQs/About/AboutContactEnvironmentalCommitmentHome/AccountingToolsAccountingCPECourses&BooksArticlesAccountingToolsCPECourses/CPECoursesCPELogInHowtoTakeaCourseGroupDiscountsStateCPERequirementsBooks/BooksListedbyTitleArticles/ArticlesTopicsIndexSiteArchivePodcast/AccountingBestPracticesPodcastIndexPodcastSummaryDictionary/FAQs/About/AboutContactEnvironmentalCommitmentHome/WhatistheCashtoCashCycle?Thecashtocashcycleisthetimeperiodbetweenwhenabusinesspayscashtoitssuppliersforinventoryandreceivescashfromitscustomers.Theconceptisusedtodeterminetheamountofcashneededtofundongoingoperations,andisakeyfactorinestimatingfinancingrequirements.Thecashtocashcalculationis:Daysinventoryonhand+Dayssalesoutstanding-Dayspayablesoutstanding=Cashtocashdays ExampleoftheCashtoCashCycleTheinventoryheldbyabusinessaveragesbeingonhandfor40days,anditscustomersusuallypaywithin50days.Offsettingthesefiguresisanaveragepayablesperiodof30days.Thisresultsinthefollowingcashtocashduration:40Daysofinventory+50Dayssalesoutstanding-30Dayspayablesoutstanding=60Cashtocashdays HowtheCashtoCashCycleisUsedThisoutcomestatesthatabusinessmustsupportitsexpendituresforaperiodof60days.Examinationofthecomponentsofthiscalculationmightleadmanagementtotakeseveraloffsettingactions,suchasshrinkingtheamountofon-handinventory,tighteningcredittocustomersorrequiringpaymentinadvance,andnegotiatinglongerpaymentstermswithsuppliers.Thecalculationisespeciallyusefulunderthefollowingcircumstances:Forecasting.Whenthereareindicationsthatpaymentorrec