What is Operating cycle for working capital?


The operating cycle is the length of time between the company’s outlay on raw materials, wages and other expenditures and the inflow of cash from the sale of the goods. In a manufacturing business, operating cycle is the average time that raw materials remain in stock less the period of credit taken from suppliers, plus the time taken for producing the goods, plus the time goods remain in finished inventory, plus the time taken by customers to pay for the goods.


Operating cycle concept is important for management of cash and management of working capital because the longer the operating cycle the more financial resources the company needs. Therefore, the management has to remain cautious that the operating cycle should not become too long.

Like it? Share with your friends!

BMS Team

We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to [email protected].


Warning: Undefined array key "html5" in /home/bmsnewco/public_html/wp-content/plugins/facebook-comments-plugin/class-frontend.php on line 140

Facebook comments:

This Website Is For Sale. Email us an offer we cannot refuse on [email protected] :)

Choose A Format
Personality quiz
Series of questions that intends to reveal something about the personality
Trivia quiz
Series of questions with right and wrong answers that intends to check knowledge
Voting to make decisions or determine opinions
Formatted Text with Embeds and Visuals
The Classic Internet Listicles
The Classic Internet Countdowns
Open List
Submit your own item and vote up for the best submission
Ranked List
Upvote or downvote to decide the best list item
Upload your own images to make custom memes
Youtube and Vimeo Embeds
Soundcloud or Mixcloud Embeds
Photo or GIF
GIF format