What's Working Capital Cycle

Between different stages of business activity exist different delays or time lags. The
working capital is used to illustrate the intervals between payments made by business
and the receipt of cash. It shows how the cash and other liquid resources enter and
leave the business.

There are four types of lags or delays inside the movement of a company:
The first one exists after obtaining their supplies, there might be a lag for up to 90 days
before payment to suppliers have to be made.
The second one is the delay that exists in the process of turning the supplies into
certain products, this could take a long time, depending on the nature of business
activity.
The third one exists between having the product, and giving them to the customers, the
finished goods may be stored, which can be expensive. In order to reduce this time lag,
they could produce goods to order, this means they only create the factur after
someone orders it.
The fourth and last lag is when the money comes back to the business from the
customers' money, this could take some time because it is common for businesses to
allow the customers to pay their bills between one to three months. However some
businesses sell their products for cash only, so this lag is eliminated.

How is this related to Cash Flow

Cash flow is a crucial aspect in financial management since all businesses need to make
sure they have enough cash when it is needed. Cash flow forecasts and credit control
systems in order to manage financial resources effectively, and an effective financial
management will ensure better that the business has enough cash when it is needed.
This is related to cash flow because in order for the working capital cycle since the cash
represents inflow, while the money spent represents outflows. A compays ability to
create value for shareholders us essentially deter,ined by its ability to generate
positive cas flow. Cash flow in diference with working capital cycle is that it only
manages cash or money while working capital cycle exclusively manages cash or money
in difference with the working capital that contains other assets like debtors.

Represent the cycle and 1 real-life example of Cash Flow (structure)

 ● Add the APA sources, all the evidence you can gather working as a team
Business studies fourth edition Dave Hall, Rob jones, Carlo Raffo, 2010pk