Finance Tools
Cost Inflation Working Capital Impact Calculator
Estimate how higher unit costs increase inventory value and working capital needs, with optional AR/AP terms for net working capital impact.
Estimate how cost inflation increases cash tied up in inventory and (optionally) the change in net working capital.
Use landed/fully-loaded unit cost if possible.
Expected unit cost inflation.
Average units you keep in inventory.
Calculated from cost increase %.
Inventory value (before)
$400,000
Inventory value (after)
$448,000
Extra cash tied up in inventory
Change: +$48,000
Percent change: 12.00%
This assumes you keep the same inventory units after costs rise.
Higher unit costs increase the cash tied up in inventory. This tool estimates the added working capital needed to keep the same inventory units.
Turn this on if you want a rough net working capital estimate including receivables and payables.
How it works
- Inventory value = unit cost × average inventory units.
- Cost inflation increases inventory value (cash tied up) linearly.
- Optional net WC approximation: Net WC = Inventory + AR − AP.
FAQ
Why focus on inventory?
Inventory is often the largest cash sink that scales directly with unit cost inflation.
Does higher cost always increase net working capital?
Not always—if suppliers extend payment terms (AP days) meaningfully, it can offset some of the increase.
How to use this cost inflation working capital impact calculator
- Enter current unit cost and expected cost increase (%).
- Enter average inventory units on hand.
- Optionally enter accounts receivable and accounts payable days.
- Review the added inventory cash tied up and net working capital change.
Example
Unit cost is $8.00, average inventory is 50,000 units, and costs rise by 12%.
- New unit cost = 8.00 × 1.12 = 8.96
- Inventory value before = 8.00 × 50,000 = 400,000
- Inventory value after = 8.96 × 50,000 = 448,000
- Extra working capital tied up = 48,000
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