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Define Company's payable cycle?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 rohith asked over 2 years ago

Hi, Explain me about Company's payable cycle?

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6 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 acharya answered about 2 years ago

Hi, The operating cycle is the average period of time required for a business to make an initial outlay of cash to produce goods, sell the goods, and receive cash from customers in exchange for the goods. This is useful for estimating the amount of working capital that a company will need in order to maintain or grow its business.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

The operating cycle is the average period of time required for a business to make an initial outlay of cash to produce goods, sell the goods, and receive cash from customers in exchange for the goods. This is useful for estimating the amount of working capital that a company will need in order to maintain or grow its business. A company with an extremely short operating cycle requires less cash to maintain its operations, and so can still grow while selling at relatively small margins. Conversely, a business may have fat margins and yet still require additional financing to grow at even a modest pace, if its operating cycle is unusually long. If a company is a reseller, then the operating cycle does not include any time for production - it is simply the date from the initial cash outlay to the date of cash receipt from the customer.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

The Accounts payable cycle is one of the internal processes of operating cycle in which time is measured for making cash outflows into cash inflows. In the process of Accounts payable cycle time taken for receiving cash or money in accounts payable is measured.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered over 2 years ago

The operating cycle is the average period of time required for a business to make an initial outlay of cash to produce goods, sell the goods, and receive cash from customers in exchange for the goods. This is useful for estimating the amount of working capital that a company will need in order to maintain or grow its business. A company with an extremely short operating cycle requires less cash to maintain its operations, and so can still grow while selling at relatively small margins. Conversely, a business may have fat margins and yet still require additional financing to grow at even a modest pace, if its operating cycle is unusually long. If a company is a reseller, then the operating cycle does not include any time for production - it is simply the date from the initial cash outlay to the date of cash receipt from the customer. The following are all factors that influence the duration of the operating cycle: The payment terms extended to the company by its suppliers. Longer payment terms shorten the operating cycle, since the company can delay paying out cash. The order fulfillment policy, since a higher assumed initial fulfillment rate increases the amount of inventory on hand, which increases the operating cycle. The credit policy and related payment terms, since looser credit equates to a longer interval before customers pay, which extends the operating cycle. Thus, several management decisions (or negotiated issues with business partners) can impact the operating cycle of a business. Ideally, the cycle should be kept as short as possible, so that the cash requirements of the business are reduced. Examining the operating cycle of a potential acquiree can be particularly useful, since doing so can reveal ways in which the acquirer can alter the operating cycle to reduce cash requirements, which may offset some or all of the cash outlay needed to buy the acquiree.

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Picsjoin 2017224123730582 Archana answered over 2 years ago

Hie Rohith, - The Accounts payable cycle is one of the internal processes of operating cycle in which time is measured for making cash outflows into cash inflows. In the process of Accounts payable cycle time taken for receiving cash or money in accounts payable is measured. - This time taken is directly proportional to the mean number of days taken for converting business into sales in the process of accounts payable.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered over 2 years ago

The Accounts payable cycle is one of the internal processes of operating cycle in which time is measured for making cash outflows into cash inflows. In the process of Accounts payable cycle time taken for receiving cash or money in accounts payable is measured. This time taken is directly proportional to the mean number of days taken for converting business into sales in the process of accounts payable.Accounts payable cycle starts with cash. Cash converted to goods, goods converted into credit sales, credit sales converted to creditors, and finally creditors converted to payables. Thanks

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