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How does production cycle effect working capital? What is the relationship between them?

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Question added by VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.
Date Posted: 2014/12/17
Mir Mujtaba Ali
by Mir Mujtaba Ali , Internal Audit Manager , Confidential

The longer the production cycle period, the more will be the time for which the capital remains blocked in raw material and semi-manufactured products. Thus, more working capital will be needed, when period of production cycle is short, less working capital will be needed.

mohamed Hakim CMA CPA Candidate
by mohamed Hakim CMA CPA Candidate , Accounting Manager , Andersen saudi arabia

Yes 

With short time production period cash will paid and received more faster 

 

idamodara reddy
by idamodara reddy , SAP S4HANA FICO Solution Architect , QUESS Corp Ltd(thr.Digital Walls Inc P Ltd)

Working capital turnover depends on the Production cycle,Sales and distribution cycle, if the cycle time is less TURN OVER WILL BE MORE ie. no times rotating the Working capital is MORE.

Malik Khalid Mahmood
by Malik Khalid Mahmood , Regional Finance Manager , Leosons International FZ LLC

- Raw materials purchased to convert into finished goods then finished goods are ready for sales.

if production cycle is not complete and finished goods are not ready for sales it means

- Working Capital will be disturbed because of the shortage of funds as there is delay of collection from sales due to  no sales activity because of the disturbed production cycle.

Mohammed Salim Allana
by Mohammed Salim Allana , Compliance and Assurance Manager , United Arab Bank

Agreed with Mir, there is a direct relationship between the production cycle and working capital. Being the amount of working capital engaged in the production/manufacturing process.  

Tamer Elbeshbishy
by Tamer Elbeshbishy , Financial and Administration Manager , Muscat Towers Holding Group

The working capital and the production cycle are two items in one suit case. The longer the operating cycle the less the working capital. and the vise verse, the shorted the operating cycle the  more rich working capital which is ofcourse needed for better business  

Basit Ali
by Basit Ali , Director of Engineering , Laverda Suites & Villas / Blue Bay Resorts

 

production cycle effect working capital

1. Length of Operating Cycle:

 

2. Nature of Business:

 

3. Scale of Operation:

 

4. Business Cycle Fluctuation:

 

5. Seasonal Factors:

 

6. Technology and Production Cycle:

 

7. Credit Allowed:

 

8. Credit Avail:

 

9. Operating Efficiency:

 

10. Availability of Raw Materials:

 

11. Level of Competition:

 

12. Inflation:

 

 

13. Growth Prospects:

 

 

The accumulation of capital forms the basis of the economic system of capitalism, where economic activity is structured around the accumulation of capital, defined as investment in order to realize a financial profit.[1] In this context, "capital" is defined as money or a financial asset invested for the purpose of making more money (whether in the form of profit, rent, interest, royalties, capital gain or some other kind of return)

Alex Al Yazouri
by Alex Al Yazouri , General Manager , Al Mushref Cooperative Society

Extremely connected. The cash conversion cycle attempts to measure the amount of time each net input CASH is tied up in the production and sales process before it is converted into CASH through sales to customers.

Salah Othman Yousef Alshambaati
by Salah Othman Yousef Alshambaati , مدير ادارة الحسابات , شركة انفال الجديدة للتجارة والمقاولات

I agree with all the answers

FITAH MOHAMED
by FITAH MOHAMED , Financial Manager , FUEL AND ENERGY CO for transportion petroleum materials

Working capital is the money invested by property in short-term assets

One of the important aspects of working capital management is the need to finance the increase in circulation  of assets that result from the increase in sales

So

 if you increased the production cycle will increase the working capital cycle

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