The difference between the firm's operating cycle and its cash conversion cycle.

The difference between the firm
High school
Essay
Finance & Accounting
Pages 3 (753 words)
Download 0
An operating cycle of a company is the average period of time which a business takes for the acquisition of goods and the receipts of cash due to sale of these goods. …

Introduction

It would only include time for the initial payment of cash by the company and the receipt of cash from the customers. Operating cycles are either short or long and both of these have serious implications for the company. An operating cycle which is short would mean that the company`s return on investment is rapid. A longer operating cycle, on the other hand, means that the company is not getting a quick return on investment and this probably affect the company in the long run. Operating cycles also differ according to the nature of the economy. If there is an economic downturn, then the operating cycle of a company would probably last longer than the one during a period of an economic growth. The operating cycle of a company is also helps in the estimation of the amount of the working capital required by the company to maintain its growth. There are a number of factors influencing the duration or the time period of the operating cycle and these include the payment terms extended to the company by its suppliers. ...
Download paper
Not exactly what you need?

Related papers

Cash vs. Accruals: Is There a Difference in Recognizing Transactions?
Such incorporation of monetary value can be done on either cash or accrual basis. This paper seeks to investigate the differences between cash and accrual recognition of transactions. The paper will explore elements and principles that are involved in the two approaches to recognition. Cash method The cash approach to accounting recognizes transactions when money is transferred between parties. A…
Personal finance: Life cycle aproach
However, understanding customers’ habit may be challenging since auxiliary issues adjusts such patterns. Therefore, this script examines the life cycle approach and its usefulness when understanding consumer patterns. Furthermore, it deduces the lessons arising from such patterns. Life cycle approach centers on personal spending and savings in an individual’s livelihood. Customers present…
Auditing payroll and personnel cycle
There are a lot of elements that need to be considered, organized, and assessed in order to accurately determine a business’s actual financial earnings and expenditures. It requires identifying, collecting and analyzing all the financial documents and performed transactions, the recording of the transactions into journals, then posting the amounts from the journal to accounts in the general and…
The Accounting Cycle Steps
Some of the financial statements prepared during the accounting cycle include the balance sheet, the income statement, statement of shareholders equity, as well as the cash flow statement (Agtarap-San, 2007). The accounting cycle may take place with regard to time in which the organization prepares its financial statements. For example, a business may prepare its financial statements on a yearly,…
Accounting Cycle/Bank Reconciliation
A retail company purchases items from wholesalers and manufacturers, and sells those items to customers. The main difference between the accounting cycles will come in inventory valuation and recording. Inventory management of retail companies will be more complex than manufacturing companies because retail companies rely on their inventory heavily. Any difference in inventory valuation and…
comparison between EDF group (МдlectricitМ© de France) and E.ON S E from an investor's perspective point of view
It is assumed that the reader has basic knowledge of these tools of analysis. Capital Asset Pricing Model (CAPM) According to Rai University: “The CAPM was developed to explain how risky securities are priced…CAPM aims at a more practical approach to stock valuation.” The assumptions of CAPM include: 1. Investors hold diversified portfolios 2. Single-period transaction horizon 3. Investors…
Exploring the role of management accounting ratios techniques in enhancing the providing decision-making process: the case of Br
The fundamental principles of accounting that will be discussed for managerial purposes include liquidity, the pursuit of an optimal ratio between cash and assets. In addition, the cash conversion cycle will be described at length; with explanations for what sort of turnover can be expected for the operation in question. Details concerning organizational functionality will be discussed as well;…