Operating Cycle Concept of Working Capital:
In this working capital, we create the operating cycle. In this cycle, we compute inventory conversion period. To recognize this, we can estimate whenever we require cash for buying our inventory. We too compute debtor or receivable conversion period. To identify this, we can estimate whenever we receive cash from our debtors.
When inventory conversion period is less than debtor conversion period, we have to administer other sources for buying our inventories. When we buy good on credit, we too take care creditor’s conversion period.
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total no. of coils = 24/4= 6; coils per phase = 12/3= 4; no. of coils of groups per phase = 3 x 2 = 6
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