2. Manufacturing Cycle
The manufacturing cycle starts with the purchase of raw materials and is completed with the
production of finished goods. If the manufacturing cycle involves a longer period the need for
working capital will be more, because an extended manufacturing time span means a larger
tie-up of funds in inventories. Any delay at any stage of manufacturing process will result in
accumulation of work-in-process and will enhance the requirement of working capital. Firms
making heavy machinery or other such products, involving long manufacturing cycle, attempt
to minimize their investment in inventories (and thereby in working capital) by seeking
advance or periodic payments from customers.