How to Calculate Days Cash on Hand
Short answer. Divide cash and cash equivalents by average daily operating expenses (annual operating expenses minus non-cash items such as depreciation, divided by 365). $2 million of cash and $10 million of annual cash operating expenses is about 73 days of cash.
The formula
Days cash on hand = Cash and equivalents / ((Operating expenses - Non-cash expenses) / 365)
Step by step
- Find cash and equivalents. From the balance sheet.
- Find annual operating expenses. From the income statement.
- Remove non-cash expenses. Subtract depreciation and amortization.
- Compute the daily cash cost. Divide by 365.
- Divide. Cash divided by the daily cash cost.
Worked example
An organization with $2M cash
- Operating expenses $10.6M, depreciation $0.6M: cash expenses = $10.0M.
- Daily cost = 10,000,000 / 365 = $27,397.
- Days cash on hand = 2,000,000 / 27,397 = 73 days.
Common mistakes
- Leaving depreciation in the denominator, which understates the days.
- Counting restricted cash.
- Using a year with unusual one-time costs.
Frequently asked questions
How many days of cash is healthy?
Hospitals and non-profits often target 60 to 150 days; start-ups usually plan on 12 to 18 months of runway instead.
How is it different from the cash runway?
Runway divides cash by net monthly burn and accounts for revenue; days cash on hand ignores revenue.
Does it include investments?
Only if they can be turned into cash quickly.
General education, not personal financial advice. Example figures are illustrative.