Question

A firm has the following details: • Raw material holding: 25 days • WIP: 15 days • Finished goods: 20 days • Receivables: 30 days • Payables: 40 days • Creditors for wages & overheads: 10 days Calculate the net operating cycle (in days), and interpret the working capital implication.

A 50 days → Moderate working capital need
B 40 days → Low working capital need
C 60 days → High working capital need
D 70 days → Excessive working capital blockage
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