Chap – 01 Cash collected from customers = Sales – Change in accounts receivable (Ending – Beginning)

Cash paid to suppliers = Cost of goods sold – Change in A/P + Change in inventory
Chap – 02 Net Working Capital = Current assets – Current liabilities
Working Capital Requirement (WCR) = current operating assets (i.e., non-cash current assets) – current
operating liabilities (e.g., accounts payable and operating accruals)
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
Current ratio = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠−𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Quick ratio (Acid-test ratio) = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Days Inventory Held (DIH) = 𝐶𝑂𝐺𝑆 = (***) days
( )
365
𝐴/𝑅
Days Sales Outstanding (DSO) = 𝑆𝑎𝑙𝑒𝑠 = (***) days
( )
365
𝐴/𝑃
Days Payable Outstanding (DPO) = 𝐶𝑂𝐺𝑆 = (***) days
( )
365
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝐴/𝑅
Operating Cycle (OC) = 𝐶𝑂𝐺𝑆 + 𝑆𝑎𝑙𝑒𝑠 = (***) days
( ) ( )
365 365
𝐴/𝑃
Cash Conversion Period (CCP) = OC - 𝐶𝑂𝐺𝑆 = (***) days
( )
365
−𝐶𝑂𝐺𝑆 𝑆𝑎𝑙𝑒𝑠
NPVD = 𝐶𝑂𝐺𝑆 + 𝑖
[1+ ( )(𝐷𝑃𝑂)] 1+ ( )(𝐷𝐼𝐻+𝐷𝑆𝑂)
365 365
In which,
COGSD = daily cost of goods sold, SalesD = daily sales, i = annual opportunity cost
NPVd
NPVperp = 𝑖
( )
365
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤 (𝑂𝐶𝐹)
Chap – 03 Cash Conversion Efficiency (CCE) = 𝑅𝑒𝑣𝑒𝑛𝑢𝑒𝑠
𝐶𝑎𝑠ℎ 𝐶𝑎𝑠ℎ
Cash Ratio = , Cash Burn Rate = 𝐶𝑂𝐺𝑆
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
365
𝐶𝑎𝑠ℎ+𝐸[𝑂𝐶𝐹]
Net Liquid Balance = Cash – Notes Payable, Current Liquidity Index (CLI) =
𝑁𝑜𝑡𝑒𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒
𝐶𝑎𝑠ℎ+𝑈𝑛𝑢𝑠𝑒𝑑 𝐶𝑟𝑒𝑑𝑖𝑡 𝐿𝑖𝑛𝑒𝑠+𝐸[𝑂𝐶𝐹]
Lamba Ʌ= 𝜎 𝑂𝐶𝐹
𝑇𝐶𝑁 𝑍
Baumol Model = (F) ( 𝑍 ) + (𝑖) (2)
Where, TCCash = total cost of the cash position
F = fixed transaction cost per sale of security
TCN = total cash needed during period
Z = cash transfer amount
i = per period opportunity cost
(2)(𝐹)(𝑇𝐶𝑁)
Z* = √ 𝑖
3 3𝐹𝜎 2
Miller-Orr Model, Z* = √ 4𝑖
Where, Z* = optimal transfer amount, F = fixed transaction cost per sale of security, 𝜎 2 = variance of
daily net cash flows, i = daily opportunity cost
𝑇 𝑄
Chap – 04, TCinventory = (F) (𝑄) + (H) ( 2 ), Where TCinventory = the total cost of holding inventory, F = fixed
order cost per order, T = total inventory units demanded, Q = order quantity, H = holding cost per
inventory unit
(2)(𝑇)(𝐹)
EOQ = √ 𝐻