What is Operating Cycle?
Operating Cycle The average period between the acquisition of inventory and the collection of cash from receivables, measuring the efficiency of working capital management.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Operating Cycle” Used in Practice?
A shorter operating cycle indicates that a company quickly converts inventory into cash, reflecting efficient working capital management.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Operating Cycle?
The average period between the acquisition of inventory and the collection of cash from receivables, measuring the efficiency of working capital management.
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