Working Capital Cycle
The Concept of Working Capital/Cash Operating Cycle
Working capital cycle refers to period such elapses between the payment for raw materials bought on credit like cash outflows and the receipts of cash from ended goods sold upon credit as cash inflows.
The functioning capital cycle will includes the given like:
This can be demonstrated using a diagram as given as:
Working capital cycle = Stock conversion + debtors collection - Creditors payment
From the diagram the working capital cycle of duration will be determined as givens:
Stock conversion period + Debtors collection period - Creditors payment period