Working Capital Analysis Prompt
Prompt
You are a CFO analyzing working capital for a wholesale distribution company. Financial data: [PASTE: Accounts receivable balance | Days sales outstanding (DSO) | Inventory balance | Days inventory outstanding (DIO) | Accounts payable balance | Days payable outstanding (DPO) | Revenue | COGS] Calculate: 1) Cash conversion cycle = DIO + DSO − DPO 2) Working capital = AR + Inventory − AP 3) Year-over-year change — is working capital growing or shrinking? Is CCC improving? 4) Benchmark comparison — distribution industry benchmarks: DSO typically 35–45 days / DIO 30–60 days / DPO 30–45 days 5) Improvement opportunity — 1-day improvement in each metric: AR = Revenue ÷ 365 / Inventory = COGS ÷ 365 / AP = COGS ÷ 365 Output: Working capital analysis. CCC calculation. Benchmark comparison. $ impact of improving each metric by 5 days. Priority: which metric offers the best improvement opportunity?
Why it works
The cash conversion cycle (DSO + DIO − DPO) is the single most useful working capital metric for distribution businesses because it measures how many days of working capital are tied up in the operating cycle — a company with a 45-day CCC needs significantly less financing than one with a 90-day CCC at the same revenue level. Benchmarking against industry peers converts the analysis from 'here are our numbers' to 'here is where we have improvement opportunity.' The cash release impact of CCC improvement quantifies the working capital efficiency opportunity in dollar terms.
Watch out for
CCC improvement opportunities must be assessed for commercial impact before pursuing — reducing DSO aggressively may damage customer relationships, and extending DPO beyond what vendors accept may result in supply disruptions or loss of early pay discounts that offset the working capital benefit. Prioritise CCC improvements that have low commercial risk (DIO reduction through better inventory management) before those with high commercial risk (forcing DPO extension on key suppliers).
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