The document discusses the working capital cycle and its importance. It notes that working capital has significant implications for both profitability and liquidity. Additionally, it states that the working capital cycle assesses the length of time that funds are tied up in working capital activities like inventory management, accounts receivable, and accounts payable. Managing working capital effectively can help free up capital and improve returns.

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Working Capital CycleWorking Capital Cycle

2. • Current Assets vs Current Liabilities
• Inter relationships
• Receive cash earlier
rather than later
• Short working capital cycle =
quicker cash received
• Cash to Cash cycle –
time between paying cash out and
receiving cash back
• Creditor settlement period
• Day’s inventory period
• Debtors settlement period

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4. • Inventory
• Management
• Economic orders
• Accounts Receivable
• Payment terms
• Accounts Payable
• Payment agreements
• Interest
• Discounts
• Overtrading
• Too much too quickly
• Insufficient long-term
capital

5. Thank You
Ali Engelbrecht
SUMMARYSUMMARY
•Working capital – significant implications for profitability
•Working capital – significant implications for liquidity
•Investment in working capital relieves demands on capital
funding
•Returns on working capital
•Working capital cycle = assesses the length of time
during which funds are tied into working capital

6. Thank You
Ali Engelbrecht
SUMMARYSUMMARY
•Working capital – significant implications for profitability
•Working capital – significant implications for liquidity
•Investment in working capital relieves demands on capital
funding
•Returns on working capital
•Working capital cycle = assesses the length of time
during which funds are tied into working capital