The operating cycle or working capital cycle starts with the time of placing the order for receiving the raw materials and ends with the time of receiving cash from the sale of finished goods. The length of operating cycle is the indicator of efficiency in management of short-term funds and working capital. The operating cycle calls for proper monitoring in order to avoid any inadvertent delays. These delays or inefficient management of the cycle could snowball into something way bigger threatening the very existence of the organisation. Enumerate some reasons that you think could lead to prolonged operating cycle and also suggest methods to overcome them.
The operating cycle or working capital cycle starts with the time of placing the order for receiving the raw materials and ends with the time of receiving cash from the sale of finished goods. The length of operating cycle is the indicator of efficiency in management of short-term funds and working capital. The operating cycle calls for proper monitoring in order to avoid any inadvertent delays. These delays or inefficient management of the cycle could snowball into something way bigger threatening the very existence of the organisation. Enumerate some reasons that you think could lead to prolonged operating cycle and also suggest methods to overcome them.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The operating cycle or working capital cycle starts with the time of placing the order for receiving the raw materials and ends with the time of receiving cash from the sale of finished goods. The length of operating cycle is the indicator of efficiency in management of short-term funds and working capital. The operating cycle calls for proper monitoring in order to avoid any inadvertent delays. These delays or inefficient management of the cycle could snowball into something way bigger threatening the very existence of the organisation. Enumerate some reasons that you think could lead to prolonged operating cycle and also suggest methods to overcome them.
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