Financial Modeling of Working Capital Operating Cycle

Sr. No. Particulars Year 0 Year 1

1 Average credit period extended by Suppliers (in days) 60 66
2 Average debtors outstanding 6.00 5.40
3 Raw Materials Consumed 60.00 66.67
4 Cost of Production 145.00 161.11
5 Cost of goods sold 157.50 175.00
6 Sales 200.00 222.22
7 Inventory of raw material 5.75 5.18
8 Work- In-progress 6.75 6.08
9 Finished goods 4.80 4.32
10 Assuming no. of days 365
11 Activity growth year on year 10%
12 operating efficiency year on year 10%

Working capital operating cycle

Sr. No. Particulars Year 0 Year 1
1 Raw Material 35 31
2 Work in progress 17 15
3 Finished goods 11 10
4 Debtors 11 10
5 Total 74 67
6 Less: creditors 60 66
7 Net working capital operating cycle 14 1

Management Summary
Sr. No. Particulars Year 0 Year 1
1 No. of days taken to convert its raw material into cash 74 67
2 No. of days financed by creditors 60 66
3 Working capital gap to be arranged 14 1
al Operating Cycle
Year 2 Year 3 Year 4 Year 5
73 80 88 97
5.40 4.86 4.86 4.37
66.67 74.07 74.07 82.30
161.11 179.01 179.01 198.90
175.00 194.44 194.44 216.05
222.22 246.91 246.91 274.35
5.18 4.66 4.66 4.19
6.08 5.47 5.47 4.92
4.32 3.89 3.89 3.50

g cycle
Year 2 Year 3 Year 4 Year 5
28 25 23 21 (Average raw material inventory / raw material consumed)*365
14 12 11 10 (Average work in progress inventory / cost of production)*365
9 8 7 7 (Average finished goods inventory / cost of goods sold)*365
9 8 7 6 (Average debtors / sales)*365
60 54 49 44
73 80 88 97
-13 -26 -39 -53

ry
Year 2 Year 3 Year 4 Year 5
60 54 49 44
73 80 88 97
-13 -26 -39 -53
w material consumed)*365
cost of production)*365
ost of goods sold)*365