Are we tying up cash in working capital?

MetricCash conversion cycle, days sales outstanding plus days inventory outstanding minus days payable outstanding

Unitdays

Line of (DSO plus DIO minus DPO) over time. Lower equals healthier working capital. Build from each cycle component. Working capital improvements release cash without revenue changes. Example: 65 days Q1, 48 days Q4 (improved 17 days, releasing real cash).

DSO

Days sales outstanding. Accounts receivable divided by revenue, multiplied by days in the period.

DIO

Days inventory outstanding. Average inventory divided by COGS, multiplied by days in the period.

DPO

Days payables outstanding. Accounts payable divided by COGS, multiplied by days in the period.

largest 1,000 listed nonfinancial companies in the US and separately in Europe, FY2024 results published in 2025 · Hackett runs the same method on two different populations and gets a roughly 8-day geographic gap, driven by European DSO and DIO both running higher, which is a genuine market difference rather than a definitional artefact. Sector dispersion inside each average is far wider than that gap, so the geographic figure should never be used as a target without the sector cut. Damodaran's January 2026 balance sheet ratios give the components as a share of sales rather than in days, and converting them properly requires dividing receivables by sales but inventory and payables by cost of sales; using sales for all three, which is common, understates DIO and DPO by roughly a third at typical gross margins. Private company cycles are usually worse than these listed-company figures because terms are dictated to them rather than by them.

The net cycle line improves while the DPO bar is the only component moving, so the cycle is being financed by suppliers rather than by collections or inventory turns, and the gain reverses the moment terms are renegotiated.

Cash conversion cycle falls from 46 to 37 days on a 12-day DPO extension while DSO worsens by 2 days and DIO by 1.

• Plot the three components as a stacked chart rather than reporting the net number. Hackett's 2025 US survey shows the entire 4 percent cycle improvement came from a 3 percent DPO move while DSO and DIO both deteriorated, which a single net line would have concealed.
• Attack receivables first once the components are separated. Hackett puts receivables at the largest share of excess working capital, about $600 billion across the top 1,000 US companies, driven by an 18-day DSO gap between top quartile and median performers.
• Set inventory targets by category rather than in aggregate. European DIO reached 68.9 days in the 2025 survey, the highest in a decade, because buffers were built against supply chain risk, and a single aggregate target lets slow-turning categories hide behind fast ones.
• Convert the days figure into a cash number on the chart itself. At $200M of revenue, one day of cycle is roughly $550k, which is the only framing that reliably gets commercial teams to accept tighter terms.

1. The Hackett Group2025 U.S. Working Capital Survey · 2025 · n=top 1,000 U.S. publicly traded nonfinancial companies, FY2024 Reports a US cash conversion cycle of 37 days for FY2024, a 4 percent improvement, driven by a 3 percent DPO improvement to 59 days while DSO and DIO both worsened slightly, with $1.7 trillion trapped in excess working capital equal to 35 percent of gross working capital and 11 percent of aggregate revenue. thehackettgroup.com ↗
2. The Hackett Group2025 European Working Capital Survey · 2025 · n=1,000 largest European-headquartered nonfinancial companies, FY2024 Reports a European cash conversion cycle of 44.8 days, a third consecutive year of deterioration, with DSO up 1 percent to 48.5 days, DIO up 4 percent to 68.9 days and DPO up 3 percent to 72.6 days, and 1.4 trillion euros of excess working capital equal to 14 percent of aggregate revenue. thehackettgroup.com ↗
3. NYU Stern (Aswath Damodaran)Working Capital Ratios by Sector (US) · 2026 · n=5,994 U.S. listed firms, data as of January 2026 Reports receivables at 12.39 percent of sales, inventory at 8.99 percent and payables at 11.30 percent for US listed nonfinancial companies as of January 2026, with grocery retail at 1.75 percent receivables and 5.49 percent inventory, general retail at minus 0.11 percent non-cash working capital, software at 16.84 percent receivables and 0.46 percent inventory, and aerospace and defence at 41.21 percent non-cash working capital. pages.stern.nyu.edu ↗
4. TechIntelPro (reporting The Hackett Group)Hackett 2025 Survey: $1.7T in Working Capital Opportunity · 2025 · secondary reporting of the Hackett 2025 U.S. Working Capital Survey, n=1,000 Reports the same US survey findings with the receivables opportunity valued at $600 billion and an 18-day DSO gap between top quartile and median performers, and top quartile companies outperforming median on DPO by 9 percent. techintelpro.com ↗
5. AtradiusB2B payment practices trends in Western Europe 2025 · 2025 · companies across 11 Western European markets, fieldwork end Q1 to start Q2 2025 Reports 47 percent of B2B invoices overdue in Western Europe with DSO stability across many sectors and more companies reporting stock build-up than faster turnover, tying up cash. group.atradius.com ↗
6. AtradiusB2B payment practices trends in North America 2025 · 2025 · credit managers at companies across Canada, Mexico and the US, fieldwork Q1 to Q2 2025 Reports overdue B2B invoices at 44 percent of B2B credit sales in North America, a slight decline year on year, with delays attributed to customer payment process inefficiencies and temporary liquidity bottlenecks. group.atradius.com ↗
7. NYU Stern (Aswath Damodaran)Margins by Sector (US) · 2026 · n=5,994 U.S. listed firms, 4,822 excluding financials, data as of January 2026 Reports COGS to sales of 62.24 percent across all US listed companies and 65.61 percent excluding financials, which is the denominator needed to convert inventory and payables ratios into days correctly. pages.stern.nyu.edu ↗