Assertion: Different products will have different operating cycles or cash conversion cycles.
Reasoning: Longer the operating cycle, working capital quantum is less while shorter the cycle, more working capital is needed.
Reasoning: Longer the operating cycle, working capital quantum is less while shorter the cycle, more working capital is needed.
Answer & explanation
Correct answer: option 3
The cash conversion cycle (CCC or Operating Cycle) is the length of time between a firm's purchase of inventory and the receipt of cash from accounts receivable. It is the time required for a business to turn purchases into cash receipts from customers. CCC represents the number of days a firm's cash remains tied up within the operations of the business. Different products will have different operating cycles. If the conversion takes longer then the cycle will be longer. For trading, where there is no manufacturing (or conversion), the operating cycle will be shorter. Longer the operating cycle, working capital quantum is more; shorter the cycle, less working capital is needed.