This page is for anyone handed a blank working capital sheet and asked to fill it in for a real business, whether a factory, a domestic brand, or a course exercise. At work, lessons T15-C04-L01 to T15-C04-L04 taught working capital, the cash conversion cycle, how to shorten it, and how the same payment term affects two sides differently. This lesson mainly teaches the money flow: it puts all four pieces on one sheet, for two different businesses, side by side, so the whole picture can be read at once rather than one lesson at a time.
Without this skill, a person who understands each separate idea from this course may still struggle to build one working sheet that holds them all together correctly, or to compare two businesses' own numbers on a fair, common basis. This lesson closes that gap using Delta Garments and Cedar & Co., the same two businesses this course has followed throughout.
You need: every lesson in this course, T15-C04-L01 through T15-C04-L04.
By the end of this lesson you can:
Not covered here: receivables finance and credit insurance, the tools of the next course, T15-C05.
| Term | Meaning |
|---|---|
| Working capital | The money a business needs on hand to keep operating while it waits to be paid for goods already made. |
| Cash-flow gap | The length of time between a factory finishing production and actually receiving payment for that production. |
| Open account | A payment method where the buyer pays the factory an agreed number of days after delivery, with no bank guarantee in between. |
| Letter of credit | A bank promise to pay the factory once the shipping documents match the order. |
| Profit | The money left over after all costs are paid, out of a selling price. |
Every business this course has followed needs the same two pieces of information to complete its own working capital and cash cycle picture: its own current assets and current liabilities, to calculate working capital, and its own three day-counts, days inventory outstanding, days sales outstanding, and days payable outstanding, to calculate its own cash conversion cycle. These two calculations sit side by side on one sheet, but they are not the same calculation; working capital is a dollar amount, and the cash conversion cycle is a length of time. A complete sheet keeps them clearly separate while showing both for the same business.
| What can differ | The shapes you will meet | Why it matters |
|---|---|---|
| A factory on its export order | Delta Garments fills in its own current assets, current liabilities, and its 70, 5, 30 day-counts for Order A sold to Northline Apparel. | Its own cash conversion cycle comes to 45 days, and its own working capital reflects a relatively fast-paying export term. |
| The same factory on a domestic order | Delta Garments fills in the same sheet shape again, this time with a 60-day days sales outstanding for its equivalent-value order to Cedar & Co. | Its own cash conversion cycle rises to 100 days on the very same production, showing the payment term's own separate effect. |
| A domestic brand on its own retail cycle | Cedar & Co. fills in its own version of the sheet: its own inventory days across 12 shops, its own fast retail collection, and its own 60-day payable to Delta Garments. | Its own cash conversion cycle comes to -13 days, a genuinely different shape of business from either of Delta Garments' own two pictures. |
| A hybrid business with both | A factory running both export and domestic work, as Delta Garments does, may need two completed sheets side by side, one per order type, rather than a single blended number. | Blending very different cash cycles into one average figure can hide which part of the business actually needs the most cash. |
Mona, the merchandiser at Delta Garments, is asked to prepare one document comparing Delta Garments' own cash position on its export work with Cedar & Co.'s own cash position as a domestic retailer, for a meeting between the two companies' owners. She fills in one working capital and cash cycle sheet for each business, using every figure already established across this course.
| Business | Working capital driver | Cash conversion cycle | Result |
|---|---|---|---|
| Delta Garments (export, Order A) | Current assets from inventory and Northline Apparel's unpaid invoice | 70 + 5 - 30 = 45 days | Cash tied up, moderate |
| Delta Garments (domestic, equivalent order) | Current assets from inventory and Cedar & Co.'s unpaid invoice | 70 + 60 - 30 = 100 days | Cash tied up, high |
| Cedar & Co. (domestic retail) | Current assets from shop stock, minus Delta Garments' own unpaid invoice | 45 + 2 - 60 = -13 days | Cash effectively supplied by its own supplier |
A common mistake is completing a working capital and cash cycle sheet for only one side of a relationship, usually the factory, and drawing conclusions about a payment term from that one sheet alone. Lesson T15-C04-L04 already showed that the same term can lengthen one business's own cycle while shortening the other's; a sheet that only ever describes Delta Garments can never show Cedar & Co.'s own negative cash conversion cycle, and a merchandiser working from Delta Garments' sheet alone might wrongly assume the 60-day term is purely bad news, missing that it is exactly what keeps Cedar & Co.'s own cash position comfortable. The same trap applies inside a single hybrid factory too: completing only an export-order sheet, or only a domestic-order sheet, for Delta Garments hides half of its own true cash picture, since the two order types can carry cash conversion cycles more than fifty days apart from the same production floor.
A complete working capital and cash cycle sheet needs the same two things for any business: its own current assets and liabilities, to find its working capital, and its own three day-counts, to find its own cash conversion cycle. Filling in one sheet for a factory selling on export terms, another for the same factory selling domestically, and a third for the domestic brand buying from it, shows three genuinely different cash pictures from the very same course of lessons. Reading only one of these sheets can hide as much as it reveals. The full picture only appears when every relevant business's own sheet is completed and placed side by side.
Delta Garments' owner and Omar, the owner of Cedar & Co., meet after Mona's comparison document, from this lesson's case, is shared with both sides. Delta Garments' owner opens by saying the 60-day term is "clearly bad for everyone" and should be shortened across the board.
Here is the summary line from Mona's own document, read aloud at the meeting:
Is the 60-day term "clearly bad for everyone," as Delta Garments' owner claims? Decide before opening the answer.
No. The two results in Mona's own summary decide this together.
First, Delta Garments' own position. The 100-day cash conversion cycle does confirm that the term is a real cost to Delta Garments, tying up its own cash for a long stretch.
Second, Cedar & Co.'s own position. The same summary shows a -13-day cash conversion cycle for Cedar & Co., meaning the same term is a genuine benefit to it, letting it collect from its own retail customers well before it must pay Delta Garments.
The term is not bad for everyone; it is a real transfer of cash-timing cost from Cedar & Co. to Delta Garments. A fair conversation between the two owners should address that transfer directly, perhaps by shortening the term partway and discussing what Delta Garments receives in exchange, rather than treating the term as a shared problem it is not.
Using the three cash conversion cycle figures this lesson has assembled:
A 113-day spread between the tightest and loosest cash position in this one small comparison shows why a complete sheet, covering every relevant business, is worth building even when it takes more time than filling in just one. A decision made from Delta Garments' own 100-day figure alone would look completely different from a decision made with Cedar & Co.'s own -13-day figure also in view, and only the complete picture lets both owners negotiate from the same shared facts.
Open the course workbook's two sheets, "Working capital" and "Cash conversion cycle," and duplicate them once for each business you are analysing. Fill in Delta Garments' own figures on export terms, Delta Garments' own figures on domestic terms, and Cedar & Co.'s own figures as a retailer, using the illustrative figures from this course as your model. Compare all three before drawing any conclusion.
[Download the Working capital and cash cycle sheet](../../templates/T15-C04-working-capital-and-cash-cycle-sheet.xlsx)
1. What two calculations does a complete sheet keep separate for the same business?
2. Why can Delta Garments' export sheet and its domestic sheet to Cedar & Co. show different cash conversion cycles for the same production?
3. A merchandiser has only Delta Garments' 100-day figure on its domestic order and no figure for Cedar & Co. What is the main risk?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| Working capital | رأس المال العامل | Fonds de roulement | İşletme sermayesi | The money a business needs on hand to keep operating while it waits to be paid for goods already made. |
| Cash-flow gap | فجوة التدفق النقدي | Écart de trésorerie | Nakit akışı açığı | The length of time between a factory finishing production and actually receiving payment for that production. |
| Open account | حساب مفتوح | Compte ouvert | Açık hesap | A payment method where the buyer pays the factory an agreed number of days after delivery, with no bank guarantee in between. |
| Letter of credit | اعتماد مستندي | Lettre de crédit | Akreditif | A bank promise to pay the factory once the shipping documents match the order. |
| Profit | الربح | Profit | Kâr | The money left over after all costs are paid, out of a selling price. |
You now know how to build a complete working capital and cash cycle picture for a business on either side of a payment term. Course 5 turns to what a business can do with an invoice it has already issued, before its own due date arrives. Back to the course map