Why growth can require financing
IAS 2 addresses inventory and its expense when sold; IAS 7 addresses cash flows and the indirect method. Sources: **curr-stat-ias2**, About; **curr-stat-ias7**, About, indirect method. These sources do not prescribe one mandatory cash-cycle formula.
Three intervals and one example
A fictional retailer holds stock 50 days, collects 35 days after sale and pays suppliers 40 days after receipt: 50 + 35 − 40 = 45 days. If collection rises to 55 days, the cycle is 65 days, up 20. At 4 monetary units per extra day, the modelled additional tie-up is 80; actual amounts depend on margin, purchases and timing.
Deriving days and reading quality
Inventory days commonly use average inventory/cost of sales, receivable days average receivables/credit sales and payable days average supplier debt/purchases. Replacing unknown purchases with cost of sales is an assumption; using revenue in every fraction mixes bases. Read long receivable days with delinquency and losses under IFRS 9, source **curr-stat-ifrs9-text**, 5.5.17.
Negative cycles and causes
A negative cycle can result from advance customer payment and long supplier credit; it is financing, not proof of safety. Agreed credit differs from arrears. Receivable transfers, perimeter changes, write-downs and one-off balances can change the ratio without improving ordinary discipline. Fewer inventory days, more payable days and a positive profit each require a mechanism, not an automatic good-or-bad label.
Limits
Seasonal peaks may be hidden by beginning-and-ending annual balances. Do not combine days from incompatible periods; label the period and averaging method. The guide sets no universal target and forecasts no specific receipts. See [working capital](/guides/working-capital/), [inventory turnover](/glossary/oborachivaemost-zapasov/) and [receivables turnover](/glossary/oborachivaemost-debitorskoy-zadolzhennosti/).