Enter the days inventory outstanding, days sales outstanding, and days payable outstanding. The calculator will evaluate the average operating cycle.
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Operating Cycle Formula
The following formula is used to calculate the average operating cycle.
NOC = DIO + DSO - DPO
- NOC is the net operating cycle
- DIO is the days inventory outstanding.
- DSO is the days sales outstanding
- DPO is the days payables outstanding
To calculate the operating cycle, subtract the days payable outstanding from the days sales outstanding, then add the days inventory outstanding.
Operating Cycle Definition
An operating cycle is a total number of days between inventory being sold and the days to receiving the payable for that inventory.
Operating Cycle Example
How to calculate operating cycle?
- First, determine the DIO.
Calculate the days inventory outstanding.
- Next, determine the DSO.
Calculate the days sales outstanding.
- Next, determine the DPO.
Calculate the days payable outstanding.
- Finally, calculate the operating cycle.
Calculate the operating cycle using the equation above.
FAQ
An operating cycle is the difference in days between the sale of a good from inventory and the days it takes to receive payment on that sale.
