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
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
What is an operating cycle?
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.
