This question asked candidates to calculate the working capital cycle and to discuss whether the working capital cycle should be positive or negative.

Many answers calculated the working capital cycle (cash collection cycle) correctly and gained full marks for this part of the question.

Many answers incorrectly insisted that the working capital cycle should be positive. Better answers discussed that the working capital cycle depends in fact on the nature of the business operations carried out by a company.

A food retailer, for example, could combine short inventory days (perishable goods) with short trade receivables days (primarily cash transactions) and long trade payables days (buyer power) to give a negative working capital cycle.