What Are Working Capital Holding Days?
Working capital holding days measure how long cash is locked up in each stage of the business cycle — from buying raw materials to collecting payment from customers. They are the primary inputs for Form IV (Current Assets & Liabilities) in CMA Data, which directly drives the MPBF calculation.
Think of the working capital cycle as a pipeline: raw materials go in one end, and cash comes out the other. The longer the pipeline, the more working capital the business needs — and the higher the justified bank finance (MPBF).
Raw Materials → Work-in-Progress → Finished Goods → Debtors → Cash
Minus: Creditors (funded by suppliers, not the bank)
Raw Material (RM) Days
Raw Material days measure how many days' worth of raw material the business keeps in stock before it enters production.
Formula: RM Days = (Closing RM Stock ÷ Raw Material Consumed) × 365
| Industry | Typical RM Days | Reason |
|---|---|---|
| Jewellery / Gold | 30–45 days | High-value material; minimal buffer held |
| Textile / Apparel | 45–60 days | Season-dependent buying cycles |
| Pharma / Chemicals | 45–90 days | Imported RM with long lead times |
| Food Processing | 15–30 days | Perishable inputs, short shelf life |
| Steel / Metals | 30–45 days | Bulk procurement from mills |
| Trading Business | 30–60 days | Stock holding for sale |
WIP (Work-in-Progress) Days
WIP days measure how long material spends being converted into a finished product in the factory. For service businesses with no manufacturing, WIP = 0.
Formula: WIP Days = (Closing WIP Stock ÷ Cost of Production) × 365
WIP is valued at cost of raw material + labour + manufacturing overhead consumed up to that stage. In practice:
- Simple assembly processes: 1–5 days WIP
- Moderate manufacturing: 7–15 days WIP
- Complex / multi-stage processes (pharma, engineering): 15–45 days WIP
- Construction projects: WIP can be several months (work-in-progress billing)
Finished Goods (FG) Days
Finished Goods days measure how long manufactured goods are held in the warehouse before being sold and dispatched.
Formula: FG Days = (Closing FG Stock ÷ Cost of Goods Sold) × 365
| Industry | Typical FG Days |
|---|---|
| FMCG / Food | 7–15 days |
| Textile / Apparel | 30–45 days |
| Pharma | 30–60 days |
| Engineering / Machinery | 20–45 days |
| Electronics | 15–30 days |
| Steel / Metals | 15–30 days |
Debtor Days (DSO — Days Sales Outstanding)
Debtor days measure how long it takes customers to pay after a sale is made. This is the largest working capital component for most businesses.
Formula: Debtor Days = (Closing Debtors ÷ Net Sales) × 365
Banks are particularly attentive to debtor days because high debtors can signal:
- Delayed collection (cash flow risk)
- Bad debts not yet written off (overstated assets)
- Fictitious sales inflating CMA turnover
If your debtor days exceed the norm, banks will ask for an ageing analysis — how much is current (0–30 days), how much is overdue (31–90 days), and what is sticky / bad (90+ days).
Creditor Days (DPO — Days Payable Outstanding)
Creditor days measure how long the business takes to pay its suppliers. Creditors are a free source of working capital — the longer you can delay payment to suppliers, the less bank finance you need.
Formula: Creditor Days = (Closing Creditors ÷ Purchases) × 365
In the MPBF calculation, creditors are deducted from current assets — reducing the bank finance requirement. Higher creditor days = lower MPBF = smaller CC/OD limit.
How Holding Days Feed into MPBF
The holding days translate into rupee values for each working capital component, which are totalled in Form IV of the CMA:
| Component | Value Basis | Days Used |
|---|---|---|
| Raw Material Stock | RM consumed per day × RM days | RM days |
| Work-in-Progress | Cost of production per day × WIP days | WIP days |
| Finished Goods Stock | Cost of goods sold per day × FG days | FG days |
| Debtors | Net sales per day × Debtor days | Debtor days |
| Total Current Assets (TCA) | Sum of above | |
| Less: Creditors | Purchases per day × Creditor days | Creditor days |
| Working Capital Gap | TCA − Creditors | |
| MPBF (Method 2) | 75% of TCA − (CL excl. bank borrowings) | |
Industry-Wise Working Capital Day Norms
| Industry | RM Days | WIP Days | FG Days | Debtor Days | Creditor Days |
|---|---|---|---|---|---|
| Jewellery | 30 | 5 | 15 | 30 | 15 |
| Textile | 45 | 7 | 30 | 60 | 30 |
| Food Processing | 20 | 5 | 15 | 30 | 15 |
| Pharma | 60 | 30 | 45 | 60 | 45 |
| Steel | 30 | 7 | 20 | 45 | 30 |
| Trading | 45 | 0 | 0 | 45 | 30 |
| IT Services | 0 | 30 | 0 | 60 | 30 |
| Healthcare | 30 | 0 | 0 | 30 | 30 |
| Construction | 30 | 60 | 0 | 90 | 60 |
Tips for Choosing the Right Holding Days
- Use actual historical days computed from your audited Balance Sheet for the historical years
- For projected years, use the same days or a slight improvement — banks are skeptical of projected days significantly better than actuals
- Align with the RBI guidelines for your industry category if you are an MSME seeking CGTMSE coverage
- If your days differ from industry norms, attach a brief note explaining why (e.g., "we import RM from China — 90-day transit requires higher holding")
- The JS & Co CMA tool pre-fills industry-specific holding days for 20+ sectors and lets you override them with your actual figures
Auto-Calculate Working Capital in Your CMA
Enter your holding days once — the JS & Co CMA tool auto-computes Form IV (Current Assets & Liabilities) and Form V (MPBF) for all years. Free to preview.
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