Working capital cycle in a manufacturing business
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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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