Working Capital Ratio Formulas

Lambda

(Cash + Line of Credit + Daily Average Cash Flows)/Standard Deviation Daily Cash Flows

Quick Ratio

(Current Assets - Inventory)/Current Liabilities

Upper Control Limit (Miller-Orr)

3Z + Lower Control Limit

Average Cash Balance

4/3Z + Lower Control Limit

Days Payable Outstanding

AP/(COGS/365)

Days Sales Outstanding

AR/(Sales/365)

Net Liquidity Balance

Cash - Current Financial Liabilities (Long-term Debt)

Days Cash Held

Cash/(COGS/365)

Cash Ratio

Cash/Total Assets

Net Working Capital

Current Assets - Current Liabilities

Current Ratio

Current Assets/Current Liabilities

Operating Cycle

DIH+DSO

Cash Conversion Period

DIH+DSO-DPO

Total Cost (Baumol Model)

Fixed Cost(Total Cash Needed/Z) + Interest*(Z/2)

Days Inventory on Hand

Inventory/(COGS/365)

Cash Conversion Efficiency

Operating Cash Flows (Net Income + Depreciations + Change in Op. Working Capital)/Revenues

Net Operating Working Capital

Operating Current Assets - Operating Current Liabilities

Baumol Model (ECQ)

Z = sqrt[(2 x Fixed Cost x Total Cash Needed)/Interest]

Return Point (Miller-Orr)

Z+Lower Control Limit

Miller-Orr Model

Z= cuberoot[(3 x Fixed Cost x Variance)/(4*Interest)]