WORKING CAPITAL
Working capital freed by a turnover lift.
A turnover ratio is a story; a dollar figure is a decision. This calculator translates a turnover lift into the cash released from average inventory.
The arithmetic
Average inventory at any turnover ratio equals annual COGS divided by that ratio. Lifting turnover from 4x to 6x on a $2.4M COGS book moves average inventory from $600k to $400k, freeing $200k of working capital. The calculator below makes the substitution live.
INPUTS
RELEASE
Avg inventory at current
$600,000
Avg inventory at target
$400,000
Working capital freed
$200,000
Where the cash actually shows up
- Revolver pay-down. Most borrowers apply released cash against the line first.
- Cash buffer. A finance team carrying a tight thirteen-week forecast adds runway.
- Capex. The cash funds a small capital project without new debt.
- Dividend or distribution. Owner-operators take a one-off pull.
Timeline to capture
The full release takes one inventory cycle to land in cash. At a 4x ratio that is 91 days; at 6x it is 61. Plan the cash forecast for a two-quarter accumulation, not an overnight credit.