The cash cycle can be calculated by subtracting the accounts payable period from the operating cycle. The longer the cash cycle, the more working capital that is needed to finance the business. When the cash cycle is shortened, working capital is reduced and made available for other uses. T18.3 This slide shows various positions within a medium to large corporation, the areas that they manage, and the relationship of their responsibilities to the various pieces of the cash cycle. This slide shows how to calculate the inventory period.
Inventory turnover is defined as the cost of goods sold divided by the average inventory.
This is the inventory period. The accounts receivable turnover is defined as Credit sales divided by average receivables. The operating cycle is defined as the sum of the inventory period and the receivables period. The payables turnover is defined as the cost of goods sold divided by the average payables. The cash cycle is defined as the operating cycle minus the payables period.