Working capital

I don’t know where you found this statement, but on its own it does not make much sense – we never describe an operating cycle as being ‘serious’.

I am surprised at Kaplan’s poor wording. It would have been better for them to have written it as ‘a long operating cycle is potentially more dangerous….’

Any company wants the operating cycle to be as low as possible without creating problems in running the business. If there is strong growth it becomes even more important to collect receivables in as quickly as possible and not to carry excess inventory. The danger when there is strong growth is that they start to lose control over (for example) the collection of receivables because there are a lot more credit sales to deal with and therefore a lot more work for that department to deal with.

You are welcome 🙂