Arrange the following process of working capital cycle of manufacturing concern in a proper sequence:

A. Raw material
B. Cash
C. Debtors
D. Finish goods
E. Work in progress

Choose the correct answer from the options given below:

Correct option is A

The correct sequence of the Working Capital Cycle for a manufacturing concern is: B → A → E → D → C

1. B. Cash – The cycle begins with cash in hand or bank. This is used to procure raw materials, pay wages, utilities, and other production-related expenses.

2. A. Raw Material – Cash is used to purchase raw materials required for manufacturing. These materials are stored until they are needed in production.

3. E. Work in Progress (WIP) – Raw materials are processed into semi-finished goods. This stage includes labor, utilities, and overheads.

4. D. Finished Goods – After processing, the WIP is converted into finished goods, ready for sale.

5. C. Debtors – Once finished goods are sold on credit, the company creates accounts receivable (debtors). Eventually, the amount is collected, converting it back to cash, restarting the cycle.

Hence, the working capital cycle represents the circular flow of funds from cash to inventory to receivables and back to cash, which is essential for day-to-day operations.

Information Booster:

• The working capital cycle (WCC) is a crucial metric for understanding how efficiently a company manages its short-term assets and liabilities.

• Shorter WCC means quicker turnover of cash, which reflects better liquidity and financial health.

• For manufacturing concerns, the WCC starts with cash, which is used to buy raw materials.

• These materials pass through production (WIP) and become finished goods.

• When goods are sold, they become debtors/accounts receivable, and when payments are collected, cash is received, completing the cycle.