Question

TPS has three transaction cycles. Conversion Cycle, Expenditure Cycle and Revenue Cycle. Please use each to create your own business example to demonstrate your understanding for the three cycles. You can start with the expenditure cycle as shown on figure 2-1. You can use any business to articulate your example. Even though target sells to consumers, they have to buy from their vendors so you can use Target, Starbucks, or any store you are familiar with to make up your own example.

Answer 1

Lets take the example of a manufacturing unit, Suppose Tata Steels which a manufacturing unit for Steel and its related equipments.

First we take expenditure cycle, which pertains to expenses related to manufacturing and creating purchase orders for raw material, paying the amount for them and other related expenses.

Conversion cycle in this case which is related to the amount or cash we get after sales and conversion of investments into inventory which is essential to evaluate the efficiency of company's operations and management.

Revenue cycle means a process or business activity which is related to provide goods i.e. in given example Steel to customers and getting payment or collection of cash for these sales.