New 55% Off on All Courses - Enroll Now! Click Here

    Question

    When a bank is assessing an MSME's working capital

    requirement using the operating cycle method, which of the following is NOT typically considered in the calculation?
    A Time taken to convert raw materials into finished goods Correct Answer Incorrect Answer
    B Time taken to collect payment from customers (receivables) Correct Answer Incorrect Answer
    C Time taken to convert finished goods into cash Correct Answer Incorrect Answer
    D Time taken to pay suppliers (creditors) Correct Answer Incorrect Answer
    E Time taken to repay long-term loans Correct Answer Incorrect Answer

    Solution

    The operating cycle method for calculating working capital focuses on the time it takes for the business to convert its inventory into cash through sales and collections. Long-term loan repayments are not included in the operating cycle, as they are considered a separate financing consideration.

    Practice Next