You are a financial expert and your company starts a business of manufacturing baby toys. Suggest the working capital requirements and phases of the operating cycle.

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Solution

It is a manufacturing company. Thus, the requirement of working capital is significant as these companies require to maintain a stock of raw materials, semi-finished and finished goods.

Phases of the operating cycle of a manufacturing company are:

(i) Purchase of raw material

(ii) Payment of labour, power, fuel and other expenses

(iii) Converting raw material into finished goods

(iv) Sale of finished goods

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