Cash cycle
The cash operating cycle estimates the time between paying suppliers and collecting cash from customers. A common formula is inventory holding days + receivables collection days − payables payment days. It indicates how long operations tie up finance. Use consistent annual or period figures and recognise that the ratios are averages rather than a timetable for individual transactions.
Worked example
Inventory days of 50 plus receivables days of 30 less payables days of 40 gives a 40-day cash cycle.
Common mistake
A shorter cycle can improve financing needs, but delaying suppliers excessively may damage supply or lose discounts.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Supporting | July 2027–August 2028 |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Cash operating cycle, Cash conversion cycle