The requirement here was to explain the cash operating cycle and its relationship with the level of investment in working capital. Many answers correctly discussed the flow of cash between the elements of current assets and current liabilities, identifying the financing gap that many organisations experience between cash payments and cash receipts.

Where answers were of variable quality, it was often because of a failure to focus on the question asked. For example, the requirement referred to the level of investment in working capital and not to the different sources of finance that might be used. Some answers discussed aggressive, moderate and conservative approaches to the financing of fluctuating and permanent current assets, but this was not what the question required.

Better answers discussed how some companies adopted a more conservative or more aggressive policy to the level of investment in working capital than other companies, and also explained how the cash operating cycle depended on the nature of business operations. The wording of the question encouraged candidates to frame their answers in these terms.