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Working capital management

4.2 Cash operating cycle

The Working Capital Cycle is the length of time between the company’s outlay on
raw materials, wages and other expenditures and the inflow of cash from the sale of
goods.

The faster a firm can ‘push’ items around the cycle, the lower the total
working capital and the lower its investment in working capital needs to
be.

Cash

Raw materials holding X
period
Raw
Receivables
materials Less: payables payment (X)
period

WIP holding period X

Finished goods holding X
period
Finished Work in
goods progress Receivables collection X
period

Working Capital Cycle X

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