Apparel Industry Management

Apparel Industry Management 3(3+0)

Lesson 20 : Capital Management

Operating Cycle

The operating cycle is the length of time required to complete the following stages of the cycle.
Operating cycle consists of five Phases: -
I.Conversion of cash in to Raw materials.
II.Conversation of raw material in to work-in-process.
III.Conversion work in process in to finished goods.
IV.Conversion of finished goods in to receivables.
V.Conversion of Receivables in to cash
Symbolically: -
O = R + W + F + D - C.
Where,
O= Length of operating cycle. R= Raw Material storage period. W= work in progress period. F= Finished stock storage period. D= Debtors collection period. C= Creditors payment period.