Operating Cycle

OPERATING CYCLE The way running(a) capital moves around the telephone circuit line is modeled by the running(a) capital daily round.This shows the coin coming into the business,what happens to it while the business has it and then where it goes.the term operating cycle differentwise known as cash cycle.In come in to earn sufficient profits,a buckram has to depend on its gross revenue activities apart from others.The continuing flow from cash to suppliers,to investors,to debtors and back in cash.The conviction gap is technically termed as operating cycle.In other words,the duration of the time required to complete the following chronological succession of events,in cocktail dress of a manufacturing firm,Is called operating cycle. 1)Conversion of cash into natural materials 2)Conversion of raw materials into work-in-progress 3)conversion of work-in-progress into finished goods 4)conversion of finished goods in debtors 5)conversion of debtors to cash Bewteen each stage of this working capital cycle there is time delay.For some business this will be very hanker where it takes them a long time to make and sell the product.They will need a substantial amount of working capital to survive.Others though whitethorn receive their cash very quickly after pay out for raw materials etc.They will need less working capital. For all businesses though they need to plan how much cash they are going to have.

The best way of doing this is a cash FLOW FORECAST. WORKING CAPITAL CYCLE From the above chart,it can be observed that the firms liquidity of a minifacturing firm depends an operating cycle involved in the conversion edge from raw materials into finished goods and then sales into cash. In case of non-maifacturing firms,the operating cycle will include the length of the time required to convert: a)Cash into inventories b)Inventories into debtors c)debtors nto cash To determine the operating cycle period,time put away associated with all the individual activities of working cycle are to be determined first.Then summing up all the... If you want to get a full essay, order it on our website: Orderessay

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