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

Asset based valuation, Asset Based Valuation  This method acquires int...

Asset Based Valuation  This method acquires into account the entire business along with reference to its assets and then divides the resultant value via the number of shares i

Allocation of financial resources, Allocation of financial resources to the...

Allocation of financial resources to the different department can be done based on the past experience of the expenses and other available relevant information. Looking at the requ

Risk adjusted discounting rate – methods of computing cost, Risk Adjusted D...

Risk Adjusted Discounting Rate - Methods of Computing Cost of Capital This method is used to establish the discounting rate to be used for a provided project. The cost of capi

Types of jobbers in stock market, Types of jobbers in Stock Market The...

Types of jobbers in Stock Market There are three kinds of jobbers as: a) Bulls A jobber buys shares while prices are down and hold them in anticipation such t

Factors of capital structure, Factors of Capital Structure 1. Availab...

Factors of Capital Structure 1. Availability of securities - This influences the company's employ of debt finance that means such if a company has enough securities, so then

The case of Apple, From the above case shareholders are very worried that a...

From the above case shareholders are very worried that apple is having too much cash,discuss six reasons why shareholders are so worried

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

Debt finance, Debt Finance Debt finance is a fixed return finance like...

Debt Finance Debt finance is a fixed return finance like the cost as interest is fixed on the par value as face value of debt. This is ideal to require if there's a strong equ

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