Question

Explain operating and cash cycle with graphical representation and also explain illustration

Answer 1

Explanation:

Business cycles are characterized by boom in one period and collapse in the subsequent period in the economic activities of a country.

These fluctuations in the economic activities are termed as phases of business cycles.

The fluctuations are compared with ebb and flow. The upward and downward fluctuations in the cumulative economic magnitudes of a country show variations in different economic activities in terms of production, investment, employment, credits, prices, and wages. Such changes represent different phases of business cycles.

Answer 2

The operating cycle is also referred to as the circulating capital which circulates in different ways in form of the present assets in a continuous manner. The funds could also be converted into cash with is receivable and which can again be reinvested into the system.

Explanation:

• The operating cycle is the time taken between acquiring of the material resources entering the process and the final cash receivable which is also called the revolving capital.
• The money always keeps on circulating or revolving from cash to current assets and back again to cash and at times the funds could also be tied up in purchasing of raw materials.
• It is later converted into semi-finished goods and thereafter into the finished goods which are available for selling in the markets.  
• It is an ongoing process and the circulation of money keeps taking place in the operational cycle at short intervals and the money is needed again for re-investments

To know more about circulation of money

What happens when too much money is in circulation?

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