Question

Given below is the ‘Cash Conversion Cycle’.

1. Identify the type of business to which the above cash conversion cycle belongs.
2. Draw a ‘cash conversion cycle’ for another type of business other than that identified in (i) above.

Answer 1

1. The given cash flow cycle is for a business that sells or buys things. This is clear from the fact that cash goes into stock, which is then sold, creating debts, and finally going back to cash. This cycle happens often in places like stores and wholesalers that buy items to resell.
2. A cash conversion cycle for a manufacturing business can be drawn as: