Calculate days of cash on hand, cash and cash equivalents, operating expenses, or period length by entering any 3 values and getting the missing one.
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Days Of Cash On Hand Formula
Days of cash on hand estimates how many days an organization can pay its operating expenses using its available cash and cash equivalents.
To solve for the other fields, the calculator uses these related formulas:
- DCOH = days of cash on hand
- C = cash and cash equivalents
- OE = operating expenses for the period
- N = number of days in the period
The calculator works by leaving one field blank and entering the other three values. If you leave days of cash on hand blank, it divides cash by operating expenses and multiplies by the number of days in the period. If you leave cash and cash equivalents blank, it calculates the cash balance needed to support the entered days of cash on hand. If you leave operating expenses blank, it calculates the level of expenses implied by the cash balance and days of cash on hand. If you leave number of days in period blank, it calculates the period length from the entered cash, expenses, and days of cash on hand.
Common Period Lengths and Operating Expense Inputs
Use a period length that matches the operating expense figure you enter. For example, annual operating expenses should normally be paired with 365 days.
| Expense Period | Typical Number of Days | Use When |
|---|---|---|
| Monthly | 30 or 31 | You are using one month of operating expenses. |
| Quarterly | 90 or 91 | You are using three months of operating expenses. |
| Annual | 365 | You are using a full year of operating expenses. |
Interpreting Days Of Cash On Hand
| Days of Cash on Hand | General Meaning |
|---|---|
| Less than 30 days | Low cash cushion. The organization may have limited time to respond to revenue delays or unexpected expenses. |
| 30 to 90 days | Moderate liquidity. This may be acceptable for stable operations, but depends on cash flow timing and risk. |
| More than 90 days | Stronger cash reserve. The organization has more time to cover operations without new cash inflows. |
Example
Example 1: Calculate days of cash on hand
You have $250,000 in cash and cash equivalents, $1,200,000 in annual operating expenses, and a 365-day period.
Example 2: Calculate cash and cash equivalents needed
You want 60 days of cash on hand, annual operating expenses are $900,000, and the period is 365 days.
FAQ
What should be included in cash and cash equivalents?
Cash and cash equivalents usually include cash in bank accounts, petty cash, money market funds, treasury bills, and other highly liquid short-term investments. Do not include inventory, accounts receivable, fixed assets, or restricted funds unless they are actually available for operating expenses.
Should operating expenses include depreciation?
For cash-focused analysis, many users exclude non-cash expenses such as depreciation and amortization. If you include depreciation in operating expenses, your days of cash on hand may look lower because the expense amount is higher even though depreciation does not require a cash payment.
Is a higher days of cash on hand always better?
Not always. A higher number usually means stronger liquidity, but too much idle cash may mean funds are not being used for operations, debt reduction, investment, or growth. The right level depends on the organization’s risk, revenue stability, debt obligations, and access to financing.