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DETERMINATION OF OPERATING
CYCLE
Compiled by: LIKHITHRAJ
MECHANICAL ENGINEERING
SMVITM
Operating cycle- A continuous process starting from payment of cash for purchasing
raw material ,production , stocking , selling until obtaining money from debtors.
 The time taken to convert raw material into cash is known as operating cycle
HOW TO DETERMINE OPERATING CYCLE
Operating cycle = Inventory period + Accounts receivable
period
Inventory period – It is the amount of time inventory sits in
storage
Account receivable period – It is the time it takes to collect
cash from the sale of the inventory.
Operating cycle
Operating cycle

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Operating cycle

  • 1. DETERMINATION OF OPERATING CYCLE Compiled by: LIKHITHRAJ MECHANICAL ENGINEERING SMVITM
  • 2. Operating cycle- A continuous process starting from payment of cash for purchasing raw material ,production , stocking , selling until obtaining money from debtors.  The time taken to convert raw material into cash is known as operating cycle
  • 3. HOW TO DETERMINE OPERATING CYCLE Operating cycle = Inventory period + Accounts receivable period Inventory period – It is the amount of time inventory sits in storage Account receivable period – It is the time it takes to collect cash from the sale of the inventory.