CAT / FIA FFM Syllabus B. Cash Budgeting - CF and different types of organisations - Notes ^{4 / 7}

Different types of business have different operating cycle

• Retailing business

  - most sales are for cash or by credit card and debit card, and the company therefore receives most of its cash income at the time of sale.

• Large supermarket chains

  - which sell goods within a few days of purchase might not pay their suppliers until after the goods have been sold and the cash received.

• Manufacturing business

  - many sales will be on credit, as will many purchases.

Sometimes the operating cycle can be analysed into two elements:

1. A trading cycle, identifying when a firm acquired goods and when it sold them

2. A cash cycle identifying the movements of cash: 

   When was the inventory actually paid for? 
   When was cash received from customers?