Answer Posted / gurdeep singh
It is the time period involved in the conversion of raw
material/resources into finished goods or services
including the credit period involved for selling
products/services.
In simple language……. let me give you an extreme example
Suppose a business buy raw material on 1st jan and it takes
one month to convert this raw material into finished goods.
On 1st feb good are ready for sale i.e. stocked at
warehouse on 1st march goods are sold and on 1st april
payment is received. Now this revenue will be used to buy
fresh raw material.
The Operating cycle is 3 months….. The time taken to
convert Working capital into revenue.
Correct me if I m wrong ……………….
| Is This Answer Correct ? | 63 Yes | 8 No |
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