what is the difference between cash cycle and operating cycle???
Dear Student,
Cash cycle and operating cycle both measures how long it takes money to flow into the business. However, they measure slighlty different aspects of cash flow. The following are some points of distinction between the two:
1) Operating cycle measures the time period from the date of receiving of materials for manufacturing and receiving money from its sale, while, cash cycle measures it from the date of purchasing of raw materials and receiving money from sale of finished goods.
2) Operating cycles informs how long it takes to manufacture and sell the products, whereas, cash cycle shows how profitable a business is.
3) Both cycles affect functioning of one another. For example, if a business takes long time to sell the manufactured products, it will keep inventory for longer period as well. Therefore, cash cycle may become longer as more inventory will have to be purchased and kept in the business.
Hope this answers your query.
For further doubts, do get back to us.
Keep posting!!
Cash cycle and operating cycle both measures how long it takes money to flow into the business. However, they measure slighlty different aspects of cash flow. The following are some points of distinction between the two:
1) Operating cycle measures the time period from the date of receiving of materials for manufacturing and receiving money from its sale, while, cash cycle measures it from the date of purchasing of raw materials and receiving money from sale of finished goods.
2) Operating cycles informs how long it takes to manufacture and sell the products, whereas, cash cycle shows how profitable a business is.
3) Both cycles affect functioning of one another. For example, if a business takes long time to sell the manufactured products, it will keep inventory for longer period as well. Therefore, cash cycle may become longer as more inventory will have to be purchased and kept in the business.
Hope this answers your query.
For further doubts, do get back to us.
Keep posting!!