Operating cycle concept is important for management of cash and management of working capital because the longer the operating cycle the more financial resources the company needs. Which of the following factor(s) is/are NOT included in the operating cycle concept?I. Raw material storage periodII. Work-in-progress holding periodIII. Credit period allowed by suppliersIV. Finished goods storage perioda)I and IIb)Only IIIc)II and IVd)I, III and IVCorrect answer is option 'B'. Can you explain this answer?

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Operating cycle concept is important for management of cash and management of working capital because the longer the operating cycle the more financial resources the company needs. Which of the following factor(s) is/are NOT included in the operating cycle concept?
I. Raw material storage period
II. Work-in-progress holding period
III. Credit period allowed by suppliers
IV. Finished goods storage period

a)
I and II
b)
Only III
c)
II and IV
d)
I, III and IV

Correct answer is option 'B'. Can you explain this answer?

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Operating cycle concept is important for management of cash and manage...

Operating cycle concept is important for management of cash and management of working capital because the longer the operating cycle the more financial resources the company needs. Therefore, the management has to remain cautious that the operating cycle should not become too long. Most businesses cannot finance the operating cycle (accounts receivable days + inventory days) with accounts payable financing alone.

In the form of an equation, the operating cycle process can be expressed as follows: Operating Cycle = R + W + F + D - C
Where,
R = Raw material storage period
W = Work-in-progress holding period
F = Finished goods storage period
D = Receivables (Debtors) collection period.
C = Credit period allowed by suppliers (Creditors)
Hence, option (b) is the correct answer.

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Operating cycle concept is important for management of cash and manage...

Explanation:
Operating cycle concept is important for management of cash and working capital as it helps in determining the amount of resources a company needs to finance its operations.

Factors included in the operating cycle concept:
- Raw material storage period: This refers to the time taken to store raw materials before they are used in the production process.
- Work-in-progress holding period: This is the time taken to convert raw materials into finished goods.
- Finished goods storage period: This is the time taken to store finished goods before they are sold.

Factors NOT included in the operating cycle concept:
- Credit period allowed by suppliers: This refers to the time period in which a company is allowed to pay its suppliers for the purchases made. This is not directly related to the operating cycle, as it deals with the payment terms rather than the production and sales process.
Therefore, the correct answer is option 'B' - Only III, as credit period allowed by suppliers is not included in the operating cycle concept.

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Operating cycle concept is important for management of cash and management of working capital because the longer the operating cycle the more financial resources the company needs. Which of the following factor(s) is/are NOT included in the operating cycle concept?I. Raw material storage periodII. Work-in-progress holding periodIII. Credit period allowed by suppliersIV. Finished goods storage perioda)I and IIb)Only IIIc)II and IVd)I, III and IVCorrect answer is option 'B'. Can you explain this answer?

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Operating cycle concept is important for management of cash and management of working capital because the longer the operating cycle the more financial resources the company needs. Which of the following factor(s) is/are NOT included in the operating cycle concept?I. Raw material storage periodII. Work-in-progress holding periodIII. Credit period allowed by suppliersIV. Finished goods storage perioda)I and IIb)Only IIIc)II and IVd)I, III and IVCorrect answer is option 'B'. Can you explain this answer? for Bank Exams 2025 is part of Bank Exams preparation. The Question and answers have been prepared according to the Bank Exams exam syllabus. Information about Operating cycle concept is important for management of cash and management of working capital because the longer the operating cycle the more financial resources the company needs. Which of the following factor(s) is/are NOT included in the operating cycle concept?I. Raw material storage periodII. Work-in-progress holding periodIII. Credit period allowed by suppliersIV. Finished goods storage perioda)I and IIb)Only IIIc)II and IVd)I, III and IVCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Bank Exams 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Operating cycle concept is important for management of cash and management of working capital because the longer the operating cycle the more financial resources the company needs. Which of the following factor(s) is/are NOT included in the operating cycle concept?I. Raw material storage periodII. Work-in-progress holding periodIII. Credit period allowed by suppliersIV. Finished goods storage perioda)I and IIb)Only IIIc)II and IVd)I, III and IVCorrect answer is option 'B'. Can you explain this answer?.

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