What is the operating cycle of a manufacturing company?
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In the case of manufacturing company the operating cycle refers to the time involvement from cash through the following events and again leading to collection of cash.
Show Manufacturing Cycle 1. Profits may or may not be used as working capital.  There is a regular production and sales cycle and wages and overheads accrue evenly. Wages are paid in the next month of accrual. Material is introduced in the beginning of production cycle. You are required to find out 1. Its working capital requirement 2. Its permissible bank borrowing as per 1st and 2nd method of lending. (Please refer lesson 4 unit 5) Assumptions: Debtors are taken at cost price not at selling price. Working Capital Requirement
What is operating cycle in a manufacturing firm?An operating cycle refers to the time it takes a company to buy goods, sell them and receive cash from the sale of said goods. In other words, it's how long it takes a company to turn its inventories into cash. The length of an operating cycle is dependent upon the industry.
What is normal operating cycle?Definition of normal operating cycle
the period of time required to convert cash into raw materials, raw materials into inventory finished goods, finished good inventory into sales and accounts receivable, and accounts receivable into cash.
What does an operating cycle of 60 days mean?The operating cycle is that entire period of 60 days. The inventory period equaled 50 days – from the day the company purchased the inventory to the day it was sold. The accounts receivable period is the amount of time from the sale until the company got paid and it took 10 days to get paid for the shoes sold.
What are the steps in an operating cycle?There are three basic steps in the operating cycle: buying inventory with cash, selling inventory for credit, and receiving payment for sale. The operating cycle can be calculated by adding the inventory period and the accounts receivables period.
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