Explain the cash flow cycle in Figure 8.1. 1 3 Pricing Policy Price/unit Quantity per day 100

Explain the cash flow cycle in Figure 8.1.

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1 3 Pricing Policy Price/unit Quantity per day 100 Revenue Credit day Policy Accounts receivable $1,000 Days 45 $45,000 FIGURE 8.1 Working capital policy template This figure is a template for assessing the impact of working capital policies on financial needs. It can be used to examine how working capital policies interact to determine the balances of current asset and current liability accounts. Net working capital is the excess of current assets over current liabilities and represents a funding need (or source) for the venture. Column: $10.00 Purchasing Policy Materials cost/unit Inventory Policy Days 12 Materials inventory $4,800 Quantity per day Materials cost/day $4.00 100 $400 Payables Policy Days 10 Accounts payable $4,000 Inventory Policy Finished goods inventory Days 5 $3,250 Wage Policy Labor cost/unit Quantity per day Labor cost/day $2.50 100 $250 Payroll Policy Wages payable Days 7 $1,750 Net Current assets liabilities Current working capital Income Contribution $350 $53,050 $5,750 $47,300