Working capital schedule

A retailer can be profitable and still run out of cash, because cash is tied up in stock on the shelves and in money customers owe. Rawdah Home Retail Co. shows it: between FY2023 and FY2025, inventory rose from 187.2 to 268.4 while payables barely moved, and cash fell. Rawdah Home Retail Co. is a fictional retailer; all figures are SAR millions and illustrative.

The working capital schedule turns operating assumptions (how fast customers pay, how long stock sits, how long Rawdah takes to pay suppliers) into balance-sheet lines, and the change in those balances into cash flow.

Why days work as a driver. A balance expressed in days says how many days of flow are sitting on the balance sheet. Receivables are measured against revenue because customers owe the selling price. Inventory and payables are measured against COGS because stock is carried, and suppliers are paid, at cost. Days stay fairly stable as a business grows, so balances grow with activity unless something changes how the business operates.

Putting the three together gives the cash conversion cycle: DSO + DIO − DPO, the number of days between paying suppliers and collecting from customers. Rawdah's was 80.0 days in FY2025A and is 76 days in the FY2026E plan. Each day is worth real money: at FY2026E COGS, one day of inventory is about SAR 2.6 m. That is how a practitioner sizes an inventory-reduction programme or a negotiation for longer supplier terms.

Limitations. Days are calculated on year-end balances, so a retailer with seasonal stock build-ups can look very different at another point in the year. Check that the year-end date is comparable across years, and use averages if the history is distorted. Treat sharp improvements in the forecast with suspicion: shorter inventory days need a reason (better ranging, fewer slow-moving lines), and stretching suppliers has a limit.

The schedule ends in one line, the change in net working capital, which flows into the cash flow statement in the three-statement lesson.