Register now or log in to join your professional community.
The longer the production cycle period, the more will be the time for which the capital remains blocked in raw material and semi-manufactured products. Thus, more working capital will be needed, when period of production cycle is short, less working capital will be needed.
Yes
With short time production period cash will paid and received more faster
Working capital turnover depends on the Production cycle,Sales and distribution cycle, if the cycle time is less TURN OVER WILL BE MORE ie. no times rotating the Working capital is MORE.
- Raw materials purchased to convert into finished goods then finished goods are ready for sales.
if production cycle is not complete and finished goods are not ready for sales it means
- Working Capital will be disturbed because of the shortage of funds as there is delay of collection from sales due to no sales activity because of the disturbed production cycle.
Agreed with Mir, there is a direct relationship between the production cycle and working capital. Being the amount of working capital engaged in the production/manufacturing process.
The working capital and the production cycle are two items in one suit case. The longer the operating cycle the less the working capital. and the vise verse, the shorted the operating cycle the more rich working capital which is ofcourse needed for better business
production cycle effect working capital
The accumulation of capital forms the basis of the economic system of capitalism, where economic activity is structured around the accumulation of capital, defined as investment in order to realize a financial profit.[1] In this context, "capital" is defined as money or a financial asset invested for the purpose of making more money (whether in the form of profit, rent, interest, royalties, capital gain or some other kind of return)
Extremely connected. The cash conversion cycle attempts to measure the amount of time each net input CASH is tied up in the production and sales process before it is converted into CASH through sales to customers.
I agree with all the answers
Working capital is the money invested by property in short-term assets
One of the important aspects of working capital management is the need to finance the increase in circulation of assets that result from the increase in sales
So
if you increased the production cycle will increase the working capital cycle