In the manufacturing industry, the cash cycle represents the interval between the outlay of cash to procure raw materials and the receipt of payment for the manufactured goods produced from them.
Negative working capital occurs when a company's current liabilities exceed its current assets, raising concerns about its ability to meet short-term obligations and threatening its operational viability.
The normal operating cycle is the period required to convert cash into raw materials, raw materials into inventory finished goods, finished goods inventory into sales and accounts receivable, and finally, accounts receivable back into cash.
