Operating Cycle Concept

Operating cycle concept is used in working capital management of the company. It depicts the operational efficiency of the company, when a company buys raw material from supplier it has to convert that raw material into finished product and then sell it to customer in order to generate cash so that it can buy again raw material. In simple words the time taken to convert raw material into cash by a firm will be its operating cycle, so fir example if company buys raw material and generate cash from sale of that finished good in 75 days then its operating cycle will be 75 days.

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