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Production Cycle

The document discusses the production cycle, business cycle, and credit policy of ING Industries and how they impact working capital needs. The production cycle for ING is approximately 30 days, with raw materials stored for 21 days, work in progress for 5 days, and finished goods stored for 4 days. In times of economic boom, more working capital is needed, while recession decreases working capital needs. Credit terms both given to customers and received from suppliers also influence working capital, with more generous terms requiring less working capital.

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Diwakar Singh
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44 views3 pages

Production Cycle

The document discusses the production cycle, business cycle, and credit policy of ING Industries and how they impact working capital needs. The production cycle for ING is approximately 30 days, with raw materials stored for 21 days, work in progress for 5 days, and finished goods stored for 4 days. In times of economic boom, more working capital is needed, while recession decreases working capital needs. Credit terms both given to customers and received from suppliers also influence working capital, with more generous terms requiring less working capital.

Uploaded by

Diwakar Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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, Work in- progress and stores of finished goods.

Production Cycle

Production cycle is concern with procurement of raw materials to the completion of

manufacturing process leading to the production of finished goods. Funds have to be

necessarily ties up during the process of manufacturing necessitating enhanced to working

capital. The longer time span production cycle will be longer, fund will be tie up for a longer

span of time, therefore larger working capital needed.

The production cycle of ING.is near about 30 days. It breaks up in following ways:

Raw material Storage period = 21 days

Work-in-progress period = 05 days

Finished Goods storage period = 04 days

Total = 30 days

Business Cycle

Fluctuations in economy or business may lead quantum of working capital. There are two

economic conditions, which affect quantum of working capital

(1) If there is boom condition in economy, due to purchase of additional raw material and

machinery to complete the increasing demand of product and for the cover the lag

between sales and receipt of cash, more working capital will be needed.
(2) If there is recession condition in economy it leads a fall in the quantum of working

capital, due to decrease in level of inventories and book of debts.

Note: - This situation will also follow for the ING Industries.

Credit Policy

Credit policy is relating to sales and purchase of product, which also affect the working

capital. The policies influence the requirements for the working capital in two ways

(1) Through credit terms granted to customers/ buyer of goods

I. If give more credit to customer/ buyer, then needed more working capital

II. If give less credit to customer/ buyer, then needed less working capital
(2) Credit terms available to a firm

I. If this is liberal then needed less working capital.

II. If this is not liberal then needed more working capital.

Buyers Product (Primary) Product (Semi fabricated)

Direct Customer Nil 45 days

Agent/ Stockiest 15 days 45 days

Credit period received as

Raw materials 15- 30 days

Stores and spares 30 days

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