Working Capital Conversion Cycle Financial Glossary

What is it? An accounting and financial phrase used to describe the dynamics of short-term cash flows that occur during the normal operations of a business. The working capital conversion cycle is the circular process of borrowing money first to purchase inventory, then to carry that inventory and finally to carry the resulting accounts receivable that are the proceeds of the inventory. When the receivables are paid, the firm can then use the proceeds to either repay the borrowing or to start the cycle all over again by purchasing new inventory.

Finance Term Definition Added By: Carter

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