What is working capital cycle? Calculate the working capital cycle of the manufacturing company Classic Ltd as on 31.3.24 with the data given below. (in lakh) Particulars Position as on 31.03.23 Position as on 31.03.24 I

Working capital cycle of a company is the time taken to convert its current asset and current liabilities into cash. It is the key matric for measuring the company's financial health and efficiency. A shorter working capital cycle indicates generally good health of the company because it frees up cash for other uses. A longer working cycle indicates that capital is tied up without earning return. The working capital cycle indicates the Procuring materials, production, sales and collection. Shorter the cycle means better inventory management, collection and better payment conditions. Calculation of working capital cycle of Classic Ltd. as on 31-03-24 in ₹ Lakh Working capital cycle = Inventory period + Accounts receivable period. Average Inventory = (Opening Inventory + Closing Inventory)/2 (6+4)/2 = 5 Cost of Goods Sold = Sales - Profit Profit is 33.33% on cost. Hence, cost of goods sold is (200/133.33%) x100 = 150 [Rounded Off to two decimal places] Inventory Period (A) = Average Inventory / Cost of Goods Sold x 360 (5/150) x 360 = 12 days Credit sales = Total Sales - Cash Sales 200 - 24 = 176 Accounts Receivable Period Average Book Debt / Total Credit Sale x 360 Average Book Debts = (Opening Book Debts + Closing Book Debts)/2 (20+24)/2 = 22 Account Receivable Period (B) = (22/176) x 360 = 45 days. Hence, working capital cycle (A+B) = 12+ 45 = 57 days