Module VI· Working Capital ModelingIntermediate
Question
How do you model DSO, DPO, and DIO in Excel?
Answer
AR = revenue x DSO / days in period. Inventory = COGS x DIO / days. AP = COGS or purchases x DPO / days. Forecast the days metrics based on history, seasonality, and management guidance. Then calculate change in each working-capital account for the cash flow statement.