What is 'Days Working Capital'
Days working capital is an accounting and finance term used to describe how many days it takes for a company to convert its working capital into revenue. It can be used in ratio and fundamental analysis. When utilizing any ratio, it is important to consider how the company compares to similar companies in the same industry.
BREAKING DOWN 'Days Working Capital'
Working capital is a measure of liquidity, and days working capital is a measure that helps to quantify this liquidity. The more days a company has of working capital, the more time it takes to convert that working capital into sales. In other words, a high number is indicative of an inefficient company and vice versa.
Working Capital
Working capital is calculated by subtracting current liabilities from current assets. Current assets include cash, marketable securities, inventory, accounts receivable and other shortterm assets to be used within the year. Current liabilities include accounts payable and the current portion of longterm debt. These are debts that are due within the year. The difference between the two represents the company's shortterm need for, or surplus of, cash. A positive working capital balance means current assets cover current liabilities. A negative working capital balance means current liabilities are more than current assets.
While negative and positive working capital measures provide a general overview of working capital, days working capital provides analysts with a numeric measure for comparison. The ratio provides analysts with an average for the number of days it takes a company to convert working capital into sales.
Interpreting Days Working Capital
The formula for days working capital is the product of average working capital and 365 divided by annual sales. For example, if a company makes $10 million in sales and has working capital of $100,000, the days working capital is calculated by multiplying $100,000 by 365 and then dividing the answer by $10 million. The answer is 3.65 days. However, if the company makes $100 million in sales the answer is 0.365 days.
An increased level of sales, all other things equal, produces a lower number of days working capital because more sales means the company is converting working capital to sales at a faster rate. A company with a days working capital ratio of 3.65 takes 10 times more time to turn working capital, such as inventory, into sales than a company with a days working capital ratio of 0.365. Another way to interpret this is the company with a days working capital ratio of 0.365 is 10 times more efficient than the company with a days working capital ratio of 3.65. While the company with the higher ratio is generally the most inefficient, it is important to compare against other companies in the same industry as different industries have different working capital standards.

Working Capital
Working capital is a measure of both a company's efficiency and ... 
Working Capital Turnover
A measurement comparing the depletion of working capital to the ... 
Gross Working Capital
The sum of all of a company's current assets (assets that are ... 
Working Capital Management
A managerial accounting strategy focusing on maintaining efficient ... 
Capitalization Ratios
Indicators that measure the proportion of debt in a companyâs ... 
Capital Investment
Funds invested in a firm or enterprise for the purposes of furthering ...

Investing
Calculating Days Working Capital
A companyâs days working capital ratio shows how many days it takes to convert working capital into revenue. 
Investing
Advantages of Maintaining Low Working Capital
Understand the benefits and advantages of maintaining low working capital as related to liquidity needs, capital allocation and operational efficiency. 
Investing
Explaining Working Capital Turnover
Working capital turnover is a ratio that helps show how efficiently a company is generating revenue per dollar of cash available to spend on operations. 
Small Business
Retail vs. Tech: How These Companies Use Working Capital
Learn about the difference between retail and tech businesses' use of working capital and why working capital varies so widely in the technology sector. 
Investing
The Working Capital Position
Learn how to correctly analyze a company's liquidity and beat the average investor. 
Investing
Explaining Capital Employed
Generally, capital employed refers to all of the assets used in a business that contribute to the companyâs ability to earn revenue. 
Investing
Liquidity Measurement Ratios
Learn about the current ratio, quick ratio, cash ratio and cash conversion cycle. 
Small Business
Understanding Capital
Capital has a variety of meanings, but it generally refers to financial resources. 
Investing
5 Basic Financial Ratios And What They Reveal
Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know. 
Investing
3 Companies With Low Working Capital (AREX, NDLS)
Learn about low working capital, how to calculate it, how it can impact a company's outlook and three stocks that currently feature weak working capital.

What does a low working capital ratio show about a company's working capital management?
Find out the significance of working capital management for a company and look at the working capital ratio analysts use ... Read Answer >> 
Does working capital include stock?
Discover what a company's working capital is and what it includes, how it is used, and what positive and negative figures ... Read Answer >> 
Can working capital be too high?
Learn more about the working capital ratio, and understand how an excessively high ratio can be considered a negative in ... Read Answer >> 
What ratios are most commonly used to judge working capital management?
Learn about the various working capital ratios that investors and analysts consider when evaluating a company's financial ... Read Answer >> 
Why is working capital management important to a company?
Learn about a company's working capital; good working capital management is essential to maintaining a company's liquidity ... Read Answer >> 
Can working capital be negative?
Learn under what circumstances negative working capital can arise and what it means when working capital stays negative for ... Read Answer >>