Accounting Operating Cycle Definition - Formula - Example - Importance
Accounting Operating Cycle simply defines as How ma n y days a company takes to convert inventory or stock into cash. It indicates that how efficient the company is to generate cash from the selling of Inventory and, ultimately, the company makes prompt payment to Creditors. Operating Cycle is also know as Cash Operating Cycle or Cash Conversion Cycle, because it shows how man y days the company converts inventory or stock into cash and also it determines the Working Capital Management of the business that is related to the management of smooth working flow of the business. Operating Cycle Formula: Inventor/ Stock Conversion Period + Account Receivable / Debtors Collection Period Here: Inventory / Stock Conversion Period = Average Inventor or Stock / Cost of Sales / 365 And Account Receivabl e / Deb tors...