2 min read
Definition
The operating cycle is the time from acquiring stock to collecting the cash from selling it — days inventory outstanding plus days sales outstanding. Unlike the cash conversion cycle, it does not subtract creditor days, so it measures the full length of the trading loop.
In plain terms
It captures how long your money is committed to the trading process before it returns as cash from customers. Subtract the time your suppliers fund (creditor days) and you get the cash conversion cycle — the portion you must finance.
Why it matters
Understanding the operating cycle underpins working-capital planning. See cash conversion cycle and the guide.
Related reading
Cash conversion cycle
The cash conversion cycle (CCC) is the number of days between paying for stock and receiving cash from the…
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Days inventory outstanding (DIO), or stock days, is the average number of days stock sits in the business…
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Days sales outstanding (DSO)
Days sales outstanding (DSO) is the average number of days a business takes to collect payment after making a…
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Cash conversion cycle (in days)
The cash conversion cycle counts the days between paying for stock and getting the cash back from selling it…
Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.