Glossary: M04 — Working Capital and Liquidity
| Term | Definition |
|---|
| Working capital | Current assets minus current liabilities |
| Cash conversion cycle (CCC) | DOH + DSO − DPO; time from paying suppliers to collecting cash from customers |
| Days of inventory on hand (DOH) | Average number of days inventory is held before sale |
| Days sales outstanding (DSO) | Average number of days to collect receivables |
| Days payable outstanding (DPO) | Average number of days to pay suppliers |
| Current ratio | Current assets / Current liabilities |
| Quick ratio | (Cash + Marketable securities + Receivables) / Current liabilities |
| Pull on liquidity | Source of cash — accelerates inflows |
| Drag on liquidity | Use of cash — delays inflows or accelerates outflows |
| Credit terms | Payment conditions offered to customers (e.g., 2/10 net 30) |