The cash cycle occurs in the following sequence:

Question

Quizplus · Accepted Answer

The cash cycle describes the process a company goes through to convert its investments in inventory back into cash. It starts with cash used to purchase raw materials, which are then manufactured into finished goods. These goods are sold on credit, creating receivables, and when these receivables are collected, the company has converted its inventory back into cash. Therefore, the correct sequence is cash, raw materials, finished goods, receivables, and cash.

The Cash Cycle Occurs in the Following Sequence