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What are the related cash flow to the operating cycle?

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Question ajoutée par Nadjib RABAHI , Freelancer , My own account
Date de publication: 2016/05/04
Yasir Ilyas Malik
par Yasir Ilyas Malik , CREDIT ANALYST - Commercial & Corporate , NATIONAL BANK OF PAKISTAN

Related cash flows to operating cycle is generation of positive cash flow  by a company's normal business operations,which includes inventory turn over time,A/c receivable turnover by which a analyst could asses the company efficiency to meet their short term liabilities and is company able to generate sufficient positive cash flow to maintain and grow its operations.

This could calculate by inventory turn around time into cash again and what is the company strength to recover/receive its Accounts receivable. This is my understanding please also put your feedback for better understanding. thanks. 

 

As we all know that the operating and cash cycles plays a vital role in any business. so every company try to maintain balance between both cycles so that its worth will be increase. so the parts related to that are payables, inventory as well as sales. after the the calculations if they found that they get back their money from a transaction earlier, that will be beneficial for any company.

Ahmed Hosny
par Ahmed Hosny , Credit Analyst , The National Bank Of Egypt

The operating cycle is a "twin" of the cash conversion cycle. While the parts are the same - receivables, inventory and payables - in the operating cycle, they are analyzed from the perspective of how well the company is managing these critical operational capital assets, as opposed to their impact on cash.

Mubeen Ansari
par Mubeen Ansari , General Manager Accounts and Administration , Balochistan Engineering Works Limited

Operating cycle and cash cycle are two major components of working capital management and requires detail analysis of inventory, receivables, and payables.

An operating cycle is the average time period between the acquisition of inventory and the receipt of cash from the inventory's sale whereas the cash conversion cycle is the number of days required for a company to convert resources to cash flows. The shorter the cycle it is better.

Operating cycle = Days inventory outstanding + Days sales outstanding

Cash Conversion Cycle = Operating cycle – Days payable outstanding

Nagah El-Ossaily
par Nagah El-Ossaily , Group Chief Financial CFO- IPO expert , A listed Joint stock Retail & Wholesales company

 the operating cycle is the time period from inventory purchase until the receipt of cash,

 

Operating cycle = age of inventory + collection period

the cash cycle is the time period from when cash is paid out, to when cash is received.

Cash cycle= (Average Stockholding Period) + (Average Receivables Processing Period) – (Average Payables Processing Period)

Together they are called as cash operating cycle. Both operating cycle and cash cycle plays a important role in working capital management.

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