Working capital cycle, Finance Basics

Assignment Help:

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:

  1. Purchase of raw materials on credit from suppliers
  2. Payment of raw materials after the lapse of credit duration
  3. Conversion of raw materials into finished goods
  4. Sale of finished goods to creditors
  5. Receipt of cash from debtors.

This can be demonstrated using a diagram as given as:  

1829_working capital cycle.png

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


Related Discussions:- Working capital cycle

Explain about commercial banks in depository institutions, Explain about co...

Explain about commercial banks in depository institutions. Commercial banks: Commercial banks accept deposits or liabilities to create loans or assets and to buy governme

Define financial factors that influence value of a business, List and expla...

List and explain the three financial factors that influence the value of a business. Ans: The three issues that influence the value of a firm's stock price are cash flow , ti

IS-LM, After read all the available information carefully, prepare a two pa...

After read all the available information carefully, prepare a two page (double-spaced) essay and answer the following questions: Assume that we have the following data: C=100+0.50Y

Competitors and general public, Competitors and General Public - Measuring ...

Competitors and General Public - Measuring Business Performance Competitors These are interested in the company's presentation from the market share point of view and wi

Acceptance rule of accounting rate of return or arr, Acceptance Rule of Acc...

Acceptance Rule of Accounting Rate of Return or ARR ARR procedure will accept those projects whose ARR is higher rather than that set with management or with bank rate and it

Standard ratio analysis-compound growth rates, Standard ratio analysis shou...

Standard ratio analysis should be used to supplement the discussion of strength and weakness. The following ratios are most often used by practitioners: (a) Growth Rates: PEG R

Determine the dol for firm, XYZ Ltd. has an average selling price of Rs.10 ...

XYZ Ltd. has an average selling price of Rs.10 per unit. Its variable cost are Rs.7 , and fixed cost amount to Rs.170000. it finances all its assets by equity funds. It pays 35% ta

Determination of the coupon rate, The partners are still unhappy about one ...

The partners are still unhappy about one of the features of your analysis, namely your assumption that the coupon rate of the bond is equal to 6% per annum. Their thinking is that

Decision Analysis, 2 Questions QUESTION #1 LAPTOP SELECTION Jonna is in ...

2 Questions QUESTION #1 LAPTOP SELECTION Jonna is in market to buy a new laptop. Six different machines are under consideration. All laptops are essentially the same, but they v

What financial report exactly do, What financial report exactly do? Fin...

What financial report exactly do? Financial reports tell its intended readers about all the financial information of the company for the period it is reporting. It also contain

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd