Working Capital Cycle – An important concept in finance
Learners pursuing their academics in accounting or in finance must be acquainted with the term Working Capital Cycle. It is often heard that the learners are tired of learning the same concepts in age-old style and doing the assignments in a conventional manner. But now the habit is required to change. Just take Working Capital Cycle assignment help from us change the way of learning.
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What is Working Capital Cycle?
Working Capital Cycle is a method which refers to the time consumed by any given company to transform their current liabilities and net current assets into cash. This cycle is also helpful in highlighting or reflecting the efficiency and competency of the companies to manage their short-term liquidity position.
Though our Working Capital Cycle assignment help learners will get to understand the concept in a better way through practical business examples.
Importance of Working Capital Cycle
This overall method or the cycle is highly important because this cycle mainly focuses on the management of 4 key elements and they are actually useful for having a controlled and effective working capital cycle.
The key elements are:
- Inventory (Stock)
- Receivables (Debtors)
- Payable (Creditors)
Uses of Working Capital Cycle
- This cycle is used to specify total time taken by the company to block money on the service or product before the money gets back to the produce additional products.
- Working Capital Cycle is of two types: Short and Long
Companies having long Working Capital Cyclebasically have cash flow difficulties, but companies with cycle have healthy cash flow.
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Management of Working Capital Cycle
Working Capital Cycle management is based on different criteria, and they are:
- Credit Policy
It affects the cash-conversion cycle.
- Return on capital (ROC)
It indicates the value of thevalue of thecompany to its shareholder.
- Cashconversion cycle
It is used to get the number of days in between receiving cash from the consumers and spending capital on raw materials.
Management of this cycle can be explained in amore convenient manner through Working Capital Cycle assignment help.
Working Capital Cycle = Inventory turnover in days + debtors turnover – creditors turnover
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