Illustrate working capital cycle in a manufacturing business, Financial Management

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Working capital cycle in a manufacturing business

Average time raw materials are in stock (raw materials/purchases x 365 days)

Plus

Time taken to produce goods

Work in progress days (work in progress / cost of goods sold x 365 days)

Finished goods days(finished goods / cost of goods sold x 365 days)

Plus

Time taken by customers to pay for goods(receivable days)

Less

Period of credit taken from suppliers(payable days)

Equals

Working capital cycle (in days)

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