Question

Explain the normal operating cycle of a business.

Answer 1

Operating cycle of a business means the no of days the business produces the goods , sell the goods and receives the cash from the customer . Operating cycle will give the estimation of working capital required of the business . If a company has a shorter operating cycle means it wants less amount of cash for it's operations.

Normal Operating cycle formula

= no. Of days required to produce the goods + no of days to sale the produced goods + no of days required to receive the money from the debtor - no of days required to pay for the creditors

The above formula may vary depending upon the business

The above is the answer for the given question .