Operating Cycle

2196 WordsFeb 1, 20129 Pages
OPERATING CYCLE The way working capital moves around the business is modeled by the working capital cycle.This shows the cash coming into the business,what happens to it while the business has it and then where it goes.the term operating cycle otherwise known as “cash cycle”.In order to earn sufficient profits,a firm has to depend on its sales activities apart from others.The continuing flow from cash to suppliers,to investors,to debtors and back in cash.The time gap is technically termed as operating cycle.In other words,the duration of the time required to complete the following sequence of events,in case of a manufacturing firm,Is called operating cycle. 1)Conversion of cash into raw materials 2)Conversion of raw materials into…show more content…
…..………… TOTAL 73662.99 50946.06 31213.53 LESS-CURRENT LIABILITIES AND PROVISIONS Current Liabilities 30109.32 24092.95 25753.21 Provision 73662.99 19215.28 4489.21 NET WORKING CAPITAL 8246.75 7637.83 971.11 [pic][pic][pic]PLEASE DO THIS…………. Importance of Working Capital Ratios Ratio analysis can be used by financial executives to check upon the efficiency with which working capital is being used in the enterprise. The following are the important ratios to measure the efficiency of working capital. The following, easily calculated, ratios are important measures of working capital utilization. |RATIO |FORMULAE |RESULT |INTERPRETATION | |Stock Turnover |Average Stock * |= x
Open Document