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Release cash from a wholesaler’s stock cycle
Measure the cash conversion cycle · Fictional case
The situation
The wholesaler has 65 inventory days, 42 receivable days and 37 payable days. It can lower inventory by 10 days. Annual cost of sales is ₹365 lakh.
Your task
What happens to the cycle and estimated cash tied up in stock?
Reveal step-by-step solution
Set up the problem
Current cycle = 65 + 42 − 37 = 70 days.
Work through the numbers
New cycle = 55 + 42 − 37 = 60 days. At ₹365 lakh annual cost of sales, 10 stock days represent roughly ₹10 lakh.
Interpret the result
The shorter cycle releases about ₹10 lakh under steady activity. Check stockouts and seasonality.
What to remember
Use sales for receivable days and the relevant costs or purchases for inventory and payable days.