Lecture 19: What is operating cycle, how it is calculated and is it same in all kind of businesses?

This video shall be covering in depth analysis of operating cycle concept in working capital loans. Full details about the operating cycle is given along with disadvantages of purely trusting on it and by this you will all understand why only operating cycle is not good enough on balance sheet date and how can we mitigate those imperfections.
Further, you will also get to know whether operating cycle differs from industry to industry or does it remain the same? What exactly impacts the operating cycle of the business.
#Operatingcycle #workingcapitalcycle #businesscycle

[@RajnishSingh-pg3nd]

Got it from Linkedin.....nice videos

[@AnkushJain]

Thank you Rajnish

[@ramudgaryadav2760]

Nice great sir

[@AnkushJain]

Thank you

[@caharishbalani5429]

Thanks sir for your channel👍👍pls make a video on how to read (analysis) cibil & crif pls sir

[@AnkushJain]

Yes harish. That will come soon. But need to cover MPBF norms, drawing power and type of different working capital facilities first.

[@soumyaroy808]

Sir as always your lectures are thought provoking !
1) Incase of seasonal businesses suppose the operating cycle computed as on BS date is 90 days and as per 12 or 6 monthly sales purchase stock debtors and creditors data average WC cycle comes to 120 days then can we sanction wc for 120 days requirement and do we justify that in our process note citing the possibility of under financing considering the seasonal nature of the business ??
2) Similarly if the operating cycle as on BS date is 120 days and as per 12 or 6 monthly sales purchase stock debtors and creditors data average WC cycle comes to 90 days can we sanction wc for 90 days requirement because at some point in time during peak season the business will require 120 days of wc and during lean season may be 90 days. In this scenario what purpose will the above exercise of taking additional monthly data from the client serve apart from getting an insight about the seasonality of the business ? We can always prevent the possibility of over financing by controlling the draw down of the limit with appropriate drawing power as per monthly stock statement and debtors statement.
3) Do we have to corroborate the 12 or 6 monthly sales purchase stock debtors and creditors data additionally obtained from the client by going through the clients bank statement transactions for each month ?
Thanks in advance 🙏

[@AnkushJain]

Yes you are correct. Requirement to be met as per actual cycle and not merely cycle appearing on balance sheet date as this can be misleading. However for seasonal business we can also do seasonal and non seasonal limit by which client can use higher limit during peak season and lower limit during off season.
Further plotting from banking should be necessary as this will vet the accuracy of data of stock statement

[@soumyaroy808]

@@AnkushJain 🙏

[@AnkushJain]

👍

[@arnabganguly5634]

​@soumyaroy808: Sir from where we would get the monthly data of stock,creditors,debtors,sales,purchase. Suppose operating cycle comes out to be 120 days.What's the next step sir.

[@arnabganguly5634]

Sir when you are talking of taking monthly data of sales, debtors, purchase,creditors are you talking about monthly stock statement or is it some other data?

[@ashishijardar1334]

This is really great stuff , Thanks

[@AnkushJain]

Thank you

[@yjgratitude5]

Thanks Sir

[@AnkushJain]

Your welcome

[@gyaantoon]

Good for knowledge , kindly make a videos on retail banking product assessment like personal loan , home loan etc

[@AnkushJain]

👍

[@gauravthukral27]

Monthly stock debtor aur creditor se cycle kaise compute karana hai .... For example if we take 4 month figures toh kaise calculate hoga

[@AnkushJain]

th-cam.com/video/5qL79IK9Bg8/w-d-xo.html

[@anuragpareek6121]

Thanks for this😀

[@AnkushJain]

Your welcome

[@abhinavnair2093]

how did you calculate , operating cycle for month , based on sales,debtors,creditors, purchases data . Can you please put a simulation

[@AnkushJain]

Will do that in separate video.

[@gurpreetSingh-pz7bo]

Ohk , so now i got to knw , why in farming funding repayment shedule is always half yearly, ( 6--6 months ) ... If m not wrong due to seasonal crop...

[@AnkushJain]

Yes

[@diversifiedindia6021]

Your lecture 21 is not available at TH-cam

[@AnkushJain]

Pl check it is available. I am able to view and play it. It is related to promoter margin in business

[@jitendramishra7591]

Sir, do u have any whatsap grup also related working capital ? If yes, pls share the link.

[@AnkushJain]

No such group 😊

[@MDVaashir]

Watched

[@AnkushJain]

👍

[@meghamakkar1833]

If some debtor has paid his payment in cash and we have not shown in balance sheet.. how will it will be handled later on if we have no proof for that payment

[@AnkushJain]

Basically the debtor amount would stand as it is in balance sheet. After one year, bank will consider them as sticky debtors and if client says that they will not be knocked off then the same amount of debtor shall be reduced from capital of the client by the bank while preparing cma data.

[@rohitbhatia1537]

​@@AnkushJain sir same amount of debtors to be reduced from capital? or it is to be considered as non current while assessment? please guide.
regards

[@AnkushJain]

If client says that payment is not certain to come then please reduce from capital

[@soumyaroy808]

@@AnkushJain Sir are we reducing the bad debts from capital to arrive at the concept of operating balance sheet as you have discussed in previous lectures ? that is while recasting the balance sheet figures in the cma excel sheet to arrive at the appropriate limit. For a running account though if new bad debts are detected from monthly debtors statement or unit visit, I guess as per sanction terms such debtors more than 180 days are not financed by banks.

[@AnkushJain]

Yes if client says that a particular debtor is not recoverable and will be written off in future then we will reduce it from capital

[@shankygupta2418]

How can we rely on the client's information that he has made transaction s out of books..but now shown in the books..as per bank policy we have to judge the financial position as per financials only

[@AnkushJain]

We can't. We have to go by books only. Transactions outside books can't be trusted

[@raj0936]

6 month ya 12vmonth jo aapne bataya uska ek question kra ke concept clear krr dijiye sir...

[@AnkushJain]

Ok

[@raj0936]

@@AnkushJain when we expect as i am continuing with ur video it would be helpful if u upload with in days

[@AnkushJain]

@@raj0936 it will take some time. But I will do it in this month.

[@raj0936]

@@AnkushJain today's is d last day for month can we expect today or tomorrow sunday..

[@AnkushJain]

@@raj0936 First I need to complete existing topic of working capital products. Thereafter will come to other topics again. Expect by month end.