Calculate the turnover days used in the working capital cycle
Calculate receivables, inventory and payables days from the exact appendix formulae before combining them.
Exam scope and assessment notes
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. Use the ratio formulae in the syllabus appendix exactly; Cambridge states these are the only formulae accepted. Use year-end balances where appropriate unless the question specifies averages, and round to the requested number of decimal places. Practice is self-checked, not an official Cambridge grade. Full timed Papers 1–4 and human subject-teacher review remain outstanding.
Before you begin
- Use the AS Topic 1.6 ratio, financial-statement and stakeholder skills. These lessons add only the A Level ratios and interpretation required by Topic 3.5.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
A question gives average inventory and cost of sales. Which ratio uses both?
What you will learn
- Calculate trade receivables turnover, inventory turnover and trade payables turnover in days
- Select credit sales, cost of sales and credit purchases correctly
- Apply year-end or average balances as directed
Calculate each operating period with the prescribed base
Trade receivables turnover (days) = trade receivables ÷ credit sales × 365 days. Inventory turnover (days) = average inventory ÷ cost of sales × 365 days. Trade payables turnover (days) = trade payables ÷ credit purchases × 365 days. Use the matching denominator; total revenue or total purchases may include cash transactions and change the result.
The appendix uses average inventory for inventory turnover. It says to use year-end balances where appropriate unless a question specifies average figures. Keep units in days and round only as requested. These three component ratios are then used in the working capital cycle.
Interpret what the component days describe
Receivables days estimate how long credit sales remain unpaid; inventory days estimate how long stock is held; payables days estimate how long the business takes to pay credit suppliers. They are indicators based on accounting data, not exact dates for every transaction.
A longer period can have different causes. For example, more inventory may protect against supply disruption but ties up cash. Interpret the value against the business's policy, earlier periods and relevant comparable businesses before recommending a change.
Pause and explain
Which balance is used for inventory turnover in the appendix formula?
Worked example
Credit sales are $365,000, trade receivables are $36,500, cost of sales is $500,000, average inventory is $50,000, credit purchases are $300,000 and trade payables are $30,000. Calculate all three day ratios.
Show the worked solution
- Receivables days = $36,500 ÷ $365,000 × 365 = 36.5 days.
- Inventory days = $50,000 ÷ $500,000 × 365 = 36.5 days.
- Payables days = $30,000 ÷ $300,000 × 365 = 36.5 days.
Answer Each component is 36.5 days. Use the credit figures and average inventory specified by the appendix.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Credit sales are $480,000 and trade receivables are $48,000. Calculate receivables days.
Give me a hint
Divide the receivables balance by credit sales and multiply by 365.
Compare my reasoning
- $48,000 ÷ $480,000 = 0.10.
- 0.10 × 365 = 36.5 days.
- State the result in days, not as 10% or 0.10 times.
Trade receivables turnover is 36.5 days.
Look for these in your work
- Use credit sales as the denominator.
- Multiply the balance ratio by 365.
- Label the result in days.
Average inventory is $72,000 and cost of sales is $576,000. Calculate inventory turnover days.
Give me a hint
Use average inventory, not closing inventory, and multiply by 365.
Compare my reasoning
- $72,000 ÷ $576,000 = 0.125.
- 0.125 × 365 = 45.625 days.
- Round only if the question asks; to one decimal place the result is 45.6 days.
Inventory turnover is 45.625 days, or 45.6 days to one decimal place.
Look for these in your work
- Use average inventory.
- Use cost of sales as the denominator.
- Round to the question's requested precision.
A retailer reports receivables of $52,000, revenue of $520,000 and credit sales of $400,000. Explain which denominator should be used for receivables days and calculate the result.
Give me a hint
The appendix specifies credit sales, even when total revenue is also provided.
Compare my reasoning
- Select credit sales of $400,000 rather than total revenue of $520,000.
- $52,000 ÷ $400,000 × 365 = 47.45 days.
- Explain that using total revenue would mix cash and credit transactions and understate the collection period.
Use credit sales: receivables turnover is 47.45 days. Total revenue is not the denominator in the appendix formula.
Look for these in your work
- Select the prescribed credit-sales denominator.
- Calculate the result in days.
- Explain why total revenue changes the interpretation.
Common mistakes
- Using revenue instead of credit sales
- Using closing inventory when an average figure is required
- Dropping the 365-day multiplier or reporting a ratio as a percentage
What can you explain now?
Which denominator belongs in trade receivables turnover (days)?
Compare with the explanation
Credit sales
The appendix defines receivables days as trade receivables divided by credit sales, multiplied by 365.
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Make it stick
State the three turnover-day formulae used in the working capital cycle.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.