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Unformatted text preview: The working capital cycle As an introduction to the working capital cycle, here is a quick reminder of the main types of cash inflow and outflow in a typical business: Inflows Outflows Cash sales to customers Purchasing finished goods for re-sale Receipts from customers who were allowed to buy on credit (trade debtors) Purchasing raw materials and other components needed for the manufacturing of the final product Interest on bank and other balances Paying salaries and wages and other operating expenses Proceeds from sale of fixed assets Purchasing fixed assets Investment by shareholders Paying the interest on, or repayment of loans Paying taxes Cash flow can be described as a cycle: The business uses cash to acquire resources (assets such as stocks) The resources are put to work and goods and services produced. These are then sold to customers Some customers pay in cash (great), but others ask for time to pay. Eventually they pay and these funds are Some customers pay in cash (great), but others ask for time to pay....
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- Spring '11
- Working Capital